Kenya’s tax authority is intensifying efforts to expand compliance within the informal sector by targeting traders who use multiple mobile money paybills and tills to conceal income. The move signals a shift toward data-driven enforcement as the government seeks to close revenue gaps and capture untaxed economic activity.
According to the Kenya Revenue Authority, the practice of frequently switching mobile payment channels has become widespread among small businesses attempting to avoid leaving consistent transaction records. This strategy, historically used to fragment income streams and obscure turnover levels, is now being countered through enhanced digital tracking mechanisms.
Central to this approach is the Electronic Tax Invoice Management System (eTIMS), which enables the tax authority to match transactions across counterparties. Every mobile money payment generates dual records one for the sender and another for the receiver allowing the system to reconcile discrepancies even when one party fails to declare income. This capability significantly reduces the effectiveness of tactics such as rotating paybill or till numbers.
The crackdown comes at a time when mobile money usage continues to dominate Kenya’s transaction landscape, particularly within the informal economy. The sector accounts for a substantial share of economic activity but remains largely under-taxed. By leveraging transaction data, KRA is increasingly identifying traders who actively conduct business but either file nil returns or underreport earnings.
The enforcement strategy reflects a broader transition from traditional audit-based methods to analytics-driven compliance. Traders purchasing goods from compliant suppliers are automatically captured in the system, as suppliers are required to declare sales and issue eTIMS-compliant invoices. This creates a digital trail that links inventory purchases to potential sales revenue. Where discrepancies arise such as high purchase volumes with low or no declared income the system flags such cases for further review.
Regulatory thresholds further define the compliance landscape. Businesses with annual turnover above Sh5 million are required to register for Value Added Tax at 16 percent, while those earning between Sh1 million and Sh25 million are subject to a 1.5 percent turnover tax on gross sales. These frameworks are designed to simplify tax obligations, particularly for smaller enterprises where profit-based taxation may be difficult to verify.
However, implementation challenges persist. Informal supply chains often lack proper documentation, complicating compliance with eTIMS requirements. In cases where suppliers are below the Sh5 million threshold and not mandated to use eTIMS, buyers must generate invoices through the eCitizen platform to claim expenses. This adds administrative complexity, particularly for small traders with limited digital capacity.
To address these gaps, KRA has initiated targeted awareness campaigns in key commercial hubs such as Eastleigh, where adoption of electronic invoicing remains uneven. The authority is also issuing direct notifications to traders identified through transaction data, urging them to regularize their tax status.
From a policy perspective, the crackdown highlights the growing role of digital infrastructure in tax administration. By integrating mobile money data with tax systems, KRA is enhancing visibility into economic activity and reducing reliance on self-reporting. At the same time, the approach raises considerations around data governance, with the authority emphasizing compliance with existing legal frameworks on data protection and minimization.
Overall, the shift toward digital enforcement marks a significant evolution in Kenya’s tax strategy. While it is expected to improve revenue collection and broaden the tax base, its effectiveness will depend on balancing enforcement with taxpayer education and simplifying compliance for small businesses operating within the informal sector.
