Mpesa tax: Paybills To Become KRA Tax Registers By December

Mpesa Tax – The government will begin levying taxes on all Mpesa paybill numbers starting December 2024 in what it says is anchored on enhancing tax compliance.

This initiative, aimed at converting these paybill numbers into virtual Electronic Tax Registers (ETRs), is part of President William Ruto’s broader strategy to ensure equitable tax contributions across the economy.

Moses Kuria, the President’s senior economic advisor, emphasized that this initiative is essential for broadening the tax base and addressing disparities between formal and informal sector taxation.

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Currently, approximately three million individuals in the formal sector shoulder the tax burden for nearly eleven million informal sector workers, a situation Kuria describes as “unfair.”

“The goal is to ensure that everyone pays taxes, as mandated by our constitution,” Kuria stated.

By Christmas 2024, all paybills are expected to function as virtual ETRs for the Kenya Revenue Authority (KRA), significantly increasing the efficiency of tax collection.

The initiative primarily targets traders using mobile money services (Mpesa, T-kash and Airtel Money) who do not currently have physical ETRs.

Kuria pointed out that while more than two million companies utilize mobile payment systems, only about 200,000 are registered with physical ETRs.

This stark contrast highlights a major gap in revenue collection that the government aims to close.

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The existing situation, where KRA operates roughly 200,000 ETR devices against over two million digital payment touchpoints provided by mobile operators and banks, further illustrates the untapped potential for improving tax compliance through mobile payments.

This comes as government is under pressure from international lenders to raise revenue collection after the Finance Bill 2024 was withdrawn by President William Ruto following the deadly Gen Z protests.

Many Kenyasn are likely to revert to cash payment when the government rolls out Mpesa tax as economic problems persists.