The Kenya Revenue Authority (KRA) is planning to use mobile money transaction records, including M-Pesa Till Numbers and Pochi La Biashara accounts, to identify businesses that may be failing to declare their income for tax purposes.
In a report presented to the National Assembly’s Finance and Planning Committee, the tax authority outlined plans to analyse financial data from these payment channels and compare it with information submitted in tax returns.
The proposed checks are intended to identify traders who receive payments from customers but report lower earnings, as well as business operators who fail to file their tax returns.
According to KRA, the initiative will focus on discrepancies between declared income and electronic tax invoice records, non-filers and taxpayers with high VAT credit balances.
The authority is also seeking to bring more businesses into the tax system by identifying commercial activities that may not be fully reflected in existing tax records.
KRA Seeks to Recover KSh132 Billion Revenue Shortfall
The planned measures come after KRA collected KSh2.844 trillion in the financial year ending June 2026, against a target of KSh2.977 trillion, leaving a shortfall of approximately KSh132.1 billion.
Despite missing its target, the authority recorded a 10.6 per cent increase in revenue compared with the previous financial year.
Domestic Value Added Tax (VAT) collections reached KSh355.3 billion against a target of KSh383.2 billion, resulting in a deficit of KSh27.9 billion.
Pay As You Earn (PAYE) collections also fell short, with KRA collecting KSh598.8 billion against a target of KSh652.4 billion.
The authority is now seeking to improve compliance by comparing information from different financial and business records.
Small Businesses Face Increased Tax Scrutiny
Traders who use mobile money platforms to receive payments may face closer scrutiny as KRA expands its data-driven compliance measures.
By examining commercial transactions processed through Till Numbers and Pochi La Biashara, the authority hopes to identify businesses whose reported earnings do not match their financial records.
The proposed checks could also help identify businesses that have not registered or filed the required tax returns.
However, receiving money through a mobile wallet does not automatically mean the entire amount is taxable business income. The source and purpose of transactions remain important when determining the applicable tax obligations.
Business owners are therefore encouraged to maintain accurate sales records, reconcile mobile money transactions with their accounts and ensure their tax returns reflect their actual business activities.
KRA’s latest plans form part of broader efforts to expand the tax base, reduce undeclared income and improve revenue collection across the country.