Safaricom has expressed deep concern over Kenya’s plan to turn mobile money paybills and till numbers into a tax collection registry, aiming to address tax evasion and increase revenue.
The telecom company urged the government to avoid hampering progress in digital payments, stating that changes meant to broaden the tax base might negatively impact the usage of M-Pesa paybills and tills.
This caution comes as M-Pesa usage grows, especially with the increasing adoption of Pochi la Biashara, a service enabling small business owners, such as food vendors and matatu operators, to separate business funds from personal funds.
“We are Kenya’s largest taxpayer, so we fully understand the importance of tax compliance. For our customer base, however, we’re aware that Kenya has progressed in digital payments. We must avoid undoing some of the benefits we’ve achieved with digitisation,” stated Safaricom’s CEO, Peter Ndegwa.
The government’s initiative would label all paybills as virtual electronic tax receipts in an attempt to broaden the tax base.
This would make traders’ mobile money transactions similar to electronic Tax Invoice Management System (eTims) receipts, forming the basis for tax calculations.
This announcement coincides with the government’s push to have the Kenya Revenue Authority (KRA) connect with mobile operators’ financial platforms to track those not paying taxes on their income.
The government highlighted a gap, noting that only 200,000 firms have electronic tax registers (ETRs) while two million use paybills as digital payment points nationwide.
Initially, the plan will focus on firms with annual sales exceeding Ksh.5 million, likely targeting informal sector traders outside the KRA’s current reach.
An ETR is a cash register that records all sales for a trader’s value-added tax (VAT) calculations, monitored in real-time by the KRA.
Due to low adoption rates of physical ETRs, VAT-registered taxpayers were required to buy devices that allow the KRA to monitor tax payments on sales.
Safaricom is currently working with Kenyan authorities to ensure that reforms do not reverse the benefits of digital growth.
“We continue to work with the relevant authorities to ensure they address the needs of our customers, particularly small businesses,” said Mr. Ndegwa.
As the dominant telecom operator, Safaricom’s M-Pesa platform handles nearly all mobile payments in Kenya and is key to the desired till integration.
M-Pesa transactions increased by 10.7 percent to Ksh.20.9 trillion in the six months ending in September, up from Ksh.18.8 trillion in the same period last year.
During this period, M-Pesa transaction volumes rose by 30.6 percent to 17.1 million from 13.1 million.
Safaricom’s merchant network also grew slightly, with Lipa Na M-Pesa tills reaching 658,700 as of September 2024, compared to 658,400 in the previous year.
Signups to Pochi la Biashara more than doubled to 869,000 from 405,200.
M-Pesa revenue increased to Ksh.77.2 billion from Ksh.66.2 billion, mainly due to more chargeable transactions, which rose by 25.6 percent per active customer, averaging 37.4 monthly transactions.
The proposed linkage between M-Pesa tills and the KRA system seeks to boost VAT compliance, aiming to address the low uptake of physical ETRs.
Businesses providing taxable goods or services valued at Ksh.5 million or more annually are required to register for VAT and join eTIMS.
This integration is part of broader steps to use technology in improving tax compliance, with other measures including requiring new mobile phone IMEI registrations with the KRA for customs and excise duty compliance.
