KRA targets mobile money to smoke out tax cheats

KRA commissioner-general John Njiraini (pictured) said the move is part of the effort to expand the tax net and rope in individuals and businesses using retail level data. PHOTO | FILE 

By EDWIN OKOTH, edokoth@ke.nationmedia.com

In Summary

• KRA plans to feed the M-Pesa transactions into its Data Warehouse and Business Intelligence (DWBI) solution that is expected become operational in September to profile financial activities of millions of M-Pesa users and suggest their income levels.
• The taxman’s critics, however, say the legal machinery required to set the new initiatives rolling, including constitutional amendment, will be too huge to bear.

The Kenya Revenue Authority (KRA) is seeking access to individual and companies’ mobile money transaction records in a move that is intended to open a new front in the fight against tax cheats.

KRA is targeting mobile money as part of the agency’s financial data gathering scheme that is meant to monitor businesses and individuals who are not paying their fair share of taxes.

People familiar with the plan said the taxman is at an advanced stage of rolling out a number crunching mechanism that will use electronic data to suggest incomes of those using mobile money to pay bills and make purchases.

KRA commissioner-general John Njiraini said the move is part of the effort to expand the tax net and rope in individuals and businesses using retail level data.

“Initially we plan to focus on merchant transactions — the paybill — before moving to other mobile money transactions,” Mr Njiraini said.

The KRA plans to feed the M-Pesa transactions into its Data Warehouse and Business Intelligence (DWBI) solution that is expected become operational in September to profile financial activities of millions of M-Pesa users and suggest their income levels.

The taxman will initially use the more than 36,000 active till numbers to monitor individual transactions going by the latest official data that Safaricom released in November.

The Lipa na M-Pesa service transacted Sh15 billion last September alone, indicating the huge data mining opportunity it offers the KRA to hunt down tax evaders it blames for its missed collection targets.

The KRA, which is already receiving customs data showing what owners of specific PIN numbers import and export, what those trading with the top 3,000 companies and government institutions are paid, is also planning to mine stock exchange and property purchase records for any inconsistencies that might reveal tax evasion.

While releasing its revenue collection results last month, the KRA made public its quest to gain access to bank records as part of the effort to smoke out businesses and individuals who have been understating their income to reduce their tax burden.

READ: KRA now targets tax cheats with new scanners

The KRA’s critics, however, said the legal machinery required to set the new initiatives rolling, including constitutional amendment, will be too huge to bear.

Consumer Federation of Kenya (Cofek) secretary-general Stephen Mutoro said while the plan is well intended, it may end up killing growth of banking and mobile money penetration even as it exposes institutions to lots of litigation.

“I think the KRA is targeting the wrong people. M-Pesa transactions are small amounts and the fact that my line is used does not mean it is my income, I could have been a mere channel. We will just end up forcing people to the black market and the mattress accounts,” Mr Mutoro said.

Cofek said Article 31 of the Constitution affords citizens the right to privacy and the only legal mechanism to have that changed will involve a referendum.