Small and Medium-sized Enterprises (SMEs) may hesitate to use mobile payment platforms like PayBill and Till numbers after President William Ruto’s Senior Economic Advisor, Moses Kuria, announced plans to collect taxes through these platforms. Analysts warn that this move could raise costs for businesses and consumers, potentially hindering the growth of the digital payment ecosystem.
Kuria stated, “All those PayBills…please whisper to them that come Christmas 2024, all those PayBills will also be virtual ETRs for purposes of KRA. I know there is going to be some noise, but where did we agree that someone is not going to pay taxes?”
This proposal has sparked concerns about its impact on SMEs, which rely heavily on mobile payment platforms for transactions. While mobile payments provide efficiency, accessibility, and financial inclusion for millions of Kenyans, analysts caution that such a policy could backfire.
Victor Otieno, Managing Director of Viffa Consult, explained, “If you attempt to use the platform of PayBills and Till numbers to collect revenue, what will happen is a lot would move away from these digital platforms and revert to cash or the black economy.”
Churchill Ogutu, an economist at IC Group, suggested that the proposal is more of a surveillance tool to track untaxed market segments. He noted that over 7 million SMEs might switch to other payment methods to avoid scrutiny. Ogutu predicted that some businesses could reduce their use of PayBill and Till numbers, weakening financial transparency and efficiency.
Kuria revealed the plan during a recent KRA summit, where he announced the government’s intention to convert mobile money PayBill and Till numbers into Electronic Tax Registers (ETRs) by December 25 this year. The move is intended to tackle tax evasion and increase revenues.
“The three million formal sector in terms of income taxes contribute Ksh.500 billion. The 16 million in the informal sector contribute only Ksh.12 billion…for me it’s not an economic issue, it’s a social issue. We have decided there will be nowhere to hide for anybody at zero option,” Kuria added.
However, Otieno disagreed, saying, “They are not tax evaders, it’s that the system does not allow them to grow from micro to medium. So the reason they remain informal is the formal economy is very high in terms of compliance.”
Despite the potential for increased revenue, most experts agree that the government should proceed with caution. Analysts also urge policymakers to consider alternative tax frameworks that don’t disproportionately affect SMEs and low-income individuals.
