KRA Takes Aim at Nil Tax Returns and Visitors in Aggressive Tax Compliance Drive

The Kenyan government is taking steps to enhance tax compliance and boost revenue collection by expanding the mandatory use of Personal Identification Numbers (PINs) for various government services.

This move aims to enable the Kenya Revenue Authority (KRA) to monitor individuals' and companies' activities across different government services, allowing them to identify potential tax evasion and avoidance. Under the proposed legislation by the National Treasury, most government services, including registering titles, approving development plans, registering motor vehicles, business names, and companies, as well as importing goods, paying utility deposits, and obtaining government contracts, will now require a PIN certificate. Additionally, the KRA has issued a notice for visitors to Kenya and mobile phone importers to declare their International Mobile Equipment Identity (IMEI) numbers to customs officials.

The expansion of PIN use in nearly all public transactions is expected to increase revenue collection. However, this initiative has sparked concerns about potential privacy breaches and increased government surveillance. Critics argue that the government must ensure a balance between tax compliance and data security. The KRA further plans to analyze vast amounts of data, including mobile money transactions and other relevant information, to identify complex patterns and potential red flags in real-time.

This is expected to significantly improve the agency's detection capabilities and enable them to more effectively nab tax evaders. The government has confirmed that one of the country's leading telecommunication companies has initiated the sharing of real-time data on mobile money transactions and other relevant information with the Kenya Revenue Authority (KRA). The recently approved data management strategy aims to increase the utilization of data and analytics for compliance risk management, with a specific focus on integrating with key third-party sources for revenue assurance and risk management.

The government has emphasized that it is making substantial progress in enhancing the use of data to improve taxpayer compliance. By June 2025, the integration with telecommunication companies is expected to be finalized. The government's rationale for this data-driven approach is rooted in the belief that it can gain valuable insights into the economic activities of individuals and businesses by harnessing telecommunication data. This, in turn, will enable the identification of potential discrepancies between reported income and actual spending patterns, allowing the authorities to more effectively address instances of tax evasion and non-compliance.

“We are making good progress in enhancing the use of data to improve taxpayer compliance. The recently approved data management strategy aims to increase the usage of data and analytics for compliance risk management through: integration with key third party sources for revenue assurance and risk management-integration with telecocommunication companies has commenced and will be finalized by June 2025,” says the government.