Safaricom raises alarm over turning paybills into tax registries

The operator has issued the warning amid the continued adoption of its M-Pesa platform, especially signups to Pochi la Biashara – a product that allows small business owners, including food vendors and matatu operators, to separate business from personal funds.

“We are the largest taxpayer, so we are quite conscious about the need to pay taxes but also for our customer base, we are also conscious that this country has made significant progress on digitisation and therefore we need to make sure even as authorities try to expand the tax base, we do not roll back some of the benefits we have seen on digitisation,” said Safaricom Plc chief executive Peter Ndegwa.

The State plans to declare all paybills as virtual electronic tax receipts in fresh efforts to widen the tax base.

This means that mobile money transactions made by traders will be nearly similar to an eTims (electronic Tax Invoice Management System) receipt and a basis for tax computation.

The pronouncement comes as the State races to have Kenya Revenue Authority (KRA) integrate its system with those of mobile phone operators’ financial platforms to catch those who do not pay tax on their income.

The government pointed to the disparity between the estimated 200,000 firms that have electronic tax registers (ETRs) and the two million that use paybills as their digital payment points across the country.

Initially, this will target firms that generate over five million shillings in annual sales, suggesting it’s aimed at informal sector traders who are outside the ambit of KRA.

The ETR is a cash register with a fiscal memory that keeps a record of all transactions for purposes of the trader accounting for the value-added tax (VAT) charged at the time of sale—which is monitored in real time by the taxman.

The government has cited the low uptake of physical ETRs, which VAT registered taxpayers were required to purchase to enable the taxman to track the payment of taxes from sales.

Safaricom says it is engaging the Kenyan authorities to ensure that the reforms do not scale back efforts to digitise the economy.

“We continue to engage the right authorities and regulators to make sure they incorporate all the needs of our customers, especially the small businesses,” said Mr Ndegwa.

Safaricom, the leading telco, whose M-Pesa platform covers nearly all mobile money payments in the country, is at the centre of the desired till integration.

The value of transactions on the M-Pesa platform rose by 10.7 percent to Sh20.9 trillion in the six months ended September from Sh18.8 trillion in the same period last year.

Meanwhile, M-Pesa transaction volumes increased by 30.6 percent to 17.1 million from 13.1 million.

The platform also saw an expansion of its merchant network, with the number of Lipa Na M-Pesa tills (paybill and till number) rising marginally to 658,700 as at September 2024 from 658,400 tills at the same time last year.

Signups to Pochi more than doubled to 869,000 from 405,200 previously.

Safaricom minted Sh77.2 billion from M-Pesa in the six months, up from Sh66.2 billion previously, mainly driven by an increase in chargeable transactions.

Chargeable transactions per one-month active customer rose by 25.6 percent in the period to hit 37.4 transactions from 29.8 transactions previously.

The push to integrate M-Pesa tills with KRA systems seeks to raise compliance on the payment of VAT from sales and counter the slack created by the low uptake of physical ETRs.

Individuals or businesses supplying taxable goods or services with a value of Sh5 million or more in a year are required to register for VAT and be listed under eTIMS.