by VICTOR AMADALA

Kenya Revenue Authority (KRA) is set to roll out a suite of technology-driven solutions designed to further make tax compliance simpler, faster and more transparent.

At the centre of this transformation is a more robust electronic Tax Invoice Management System (eTIMS), tightly integrated with digital payment platforms such as M-Pesa, alongside a full overhaul of the core iTax system.

The reforms mark a decisive move away from the traditional model of post-declaration enforcement toward real-time, transaction-based tax compliance, an approach that could significantly reshape Kenya’s revenue landscape.

The authority’s Commissioner for Micro and Small Taxpayers, George Obell, told the Star that these reforms are expected to build on several others introduced in the past year, pushing general tax compliance by 16 per cent.

Under the enhanced eTIMS framework, KRA is planning to introduce end-to-end transaction visibility by linking business invoicing directly to tax obligations.

This will see businesses transmit invoices in real time through multiple channels, including web portals, mobile apps, USSD, and APIs, ensuring that every sale is immediately visible to the tax authority, effectively capturing tax at the source.

By integrating eTIMS with payment platforms, including M-Pesa and other payment service providers, the system will automatically generate Payment Registration Numbers (PRNs) and enable instant tax settlement at the point of transaction.

Obell says that this will eliminate the lag between invoicing and tax payment, a gap that has historically created room for under-reporting and delayed compliance.

“The impact is expected to be twofold: improved cash flow for the government and reduced administrative burden for businesses, which will no longer need to reconcile invoices and payments manually,’’ he said.

One of the most significant shifts lies in the pre-population of tax returns.

According to Obell, credited for efficient transformation of tax administration at the authority, sales data captured through eTIMS will feed directly into taxpayer accounts, meaning businesses will find much of their returns already filled out.

“This automation is designed to minimise human error, reduce the complexity of filing, and encourage voluntary compliance, particularly among small and medium-sized enterprises that often struggle with tax processes.

He added that the system strengthens revenue assurance by limiting opportunities for under-declaration and fraud.

“With real-time monitoring and advanced analytics, KRA will be able to flag inconsistencies as they occur, rather than months or years later.”

Complementing eTIMS is a sweeping modernisation of the iTax system, which has long served as Kenya’s primary tax administration platform.

According to the tax agency, the upgrade goes beyond incremental improvements, fronting iTax as a fully integrated, intelligent revenue management system.

At a structural level, the revenue authority is transitioning to a modular, API-driven architecture through platforms such as EAPI and GavaConnect.

This will allow seamless integration between eTIMS, payment providers like M-Pesa, and a wide range of government and third-party data sources.

For taxpayers, the changes promise a more unified and user-friendly experience.

Registration, filing and payment processes are set to be simplified across web, mobile and USSD platforms, reducing friction and lowering the cost of compliance.

A key pillar of the new system is the use of data-driven intelligence.

KRA is deploying tools such as a Taxpayer 360 view, risk profiling engines and artificial intelligence-driven analytics to better understand taxpayer behaviour.

These capabilities will enable the authority to detect non-compliance more accurately, target enforcement efforts where they are most needed, and even forecast revenue trends.

This is a shift from reactive audits to predictive compliance management, which is expected to improve efficiency while reducing unnecessary scrutiny for compliant taxpayers.

Automation will extend across core operations, from audit workflows to refund processing.

“Prepopulated returns, combined with automated case management systems, are set to cut processing times and reduce the need for manual intervention,’’ Obell said.

On the infrastructure side, KRA is investing in cloud-enabled or hybrid systems designed to deliver up to 99.8 percent uptime.

Improved speed, scalability and system reliability are expected to address past concerns about downtime and system congestion during peak filing periods.

By integrating real-time transaction data, digital payments and advanced analytics, the authority is building a platform that not only simplifies compliance but also strengthens enforcement.

For businesses, the shift could mean less paperwork and greater predictability while offering the state a powerful tool to expand the tax base, curb leakages and stabilize revenue collection

Since the establishment of the Micro and Small Taxpayers unit in 2024, Obell says KRA has made significant strides in onboarding informal businesses.

The unit has facilitated the registration of at least 511,000 taxpayers since its inception and is now targeting an additional 320,000 more in the next phase, a milestone that underscores growing engagement with small enterprises. 

“The drive will leverage a mix of media campaigns and on-the-ground mobilisation, including partnerships with county governments, trade associations and business hubs.”

It is, for instance, training at least 3,500 agents to support businesses across the country, to complement existing tax regions currently serving 22 million customers.

In March, the government announced plans to increase domestic revenue by targeting a two-percentage-point increase in the contribution of value-added tax (VAT) to gross domestic product (GDP).

The move will greatly change the country’s tax landscape and bring thousands of small businesses into the formal economy.

Only 250,000 businesses are VAT registered in the country, a figure the authority terms as insignificant. 

The ambitious plan by the Kenya Revenue Authority (KRA) seeks to raise VAT-to-GDP from the current four per cent to six per cent, edging the country closer to regional peers such as Uganda, Rwanda, and Tanzania, where VAT-to-GDP averages about nine per cent.

To realise this, KRA plans to overhaul the VAT framework, requiring all businesses, regardless of turnover, to remit VAT at the standard rate.

Currently only firms with an annual turnover exceeding Sh5 million are mandated to register for VAT.

The existing threshold has concentrated the VAT burden on a relatively small pool of compliant businesses, while leaving out a vast segment of traders. The Star