Lipa Na M-Pesa: Buy Goods from Safaricom Small business owners have been using tills to collect payments and pay employee wages and commissions. However, since the Kenya Revenue Authority (KRA) increased the scope of its compliance checks, an increasing number of business owners have abandoned their mobile merchant payment accounts and switched back to cash transactions.
Businesses that previously accepted payments using Lipa Na M-Pesa Buy Goods Till numbers are now asking their clients for cash payments after the KRA sent revenue service employees with paramilitary training to assist businesses in adhering to tax laws. In an effort to identify tax evaders, the KRA announced that it will be contacting Safaricom for information on retailers that abandoned the M-Pesa Buy Goods and Pochi La Biashara tills.
Working together with Safaricom to facilitate integration, we will get information on these drop-outs so that, from there, we can do follow-ups and compliance checks. We have several officers now who are doing compliance checks around the main towns. This will help us address this issue.
The Kenya Revenue Authority (KRA) is deploying innovative strategies, including leveraging third-party data, to achieve its ambitious revenue target of approximately Sh2.5 trillion for the current financial year ending in June 2024, a significant increase from the previous year’s Sh2.17 trillion. This fiscal pursuit has led to a notable shift in tax policies, particularly impacting small retailers whose yearly sales revenues fall within the range of Sh1 million to Sh25 million.
One pivotal measure implemented by the KRA is the enforcement of turnover tax, now obligatory for small retailers. This tax, calculated as three percent of gross annual sales, seeks to widen the tax base and capture revenue from businesses previously operating outside the formal tax net. Consequently, a growing number of these retailers are compelled to comply with taxation regulations, facing the reality of contributing a portion of their earnings to the national coffers.
The imposition of turnover tax has triggered a series of responses within the business landscape, most notably the abandonment of M-Pesa Buy Goods and Pochi La Biashara Tills by some retailers. These payment methods, once popular among small businesses due to their convenience and flexibility, are now being forsaken as entrepreneurs seek to mitigate tax liabilities. The shift away from these platforms underscores the economic ramifications of tax policy changes, as businesses adapt their operations in response to evolving fiscal requirements.
Despite efforts to enhance tax compliance, a significant portion of businesses continues to evade their tax obligations. The allure of avoiding taxation remains strong for many, driven by a variety of factors including perceived complexities in the tax system, lack of trust in government institutions, and the desire to maximize profits in an increasingly competitive market environment. This persistent tax evasion poses a formidable challenge to the KRA’s revenue mobilization efforts, highlighting the ongoing battle between enforcement measures and taxpayer non-compliance.
The prevalence of tax avoidance underscores broader systemic issues that transcend mere enforcement mechanisms. It reflects underlying socio-economic disparities, wherein certain segments of the population, particularly small businesses operating at the margins, perceive taxation as burdensome and inequitable. Addressing these perceptions necessitates not only effective enforcement but also targeted policy interventions aimed at fostering a culture of tax compliance and ensuring that the tax burden is equitably distributed across society.
Moreover, the utilization of third-party data represents a strategic pivot for the KRA in its quest for enhanced revenue collection. By tapping into external sources of information, such as financial records from banks and other institutions, tax authorities can better identify non-compliant taxpayers and detect instances of income underreporting or evasion. This data-driven approach marks a departure from traditional enforcement tactics, signaling the KRA’s adaptation to the digital age and its recognition of the potential of data analytics in bolstering tax administration.
However, the proliferation of third-party data also raises concerns regarding privacy and data protection. As tax authorities gather increasing amounts of personal and financial information from diverse sources, safeguarding individual privacy becomes paramount. Striking a balance between the imperative of revenue mobilization and the protection of taxpayer rights requires robust legislative frameworks and transparent governance mechanisms to ensure responsible data use and mitigate the risk of abuse or misuse.
In conclusion, the pursuit of revenue targets by the KRA amidst the evolving tax landscape in Kenya presents a complex tableau of challenges and opportunities. While measures such as mandatory turnover tax aim to broaden the tax base and enhance compliance among small retailers, the persistence of tax evasion underscores the need for holistic approaches that address underlying socio-economic factors and perceptions of taxation. Leveraging third-party data represents a promising avenue for improving tax administration, yet it necessitates careful navigation to uphold principles of privacy and data protection. Ultimately, achieving sustainable revenue mobilization requires a delicate balance between enforcement, taxpayer education, and policy innovation to foster a tax system that is both effective and equitable.