NAIROBI, Kenya — Kenya Revenue Authority (KRA) is accelerating a sweeping digital transformation of the country’s tax system, rolling out technology-driven reforms aimed at simplifying compliance, tightening enforcement, and expanding the tax base.
At the centre of the overhaul is an enhanced electronic Tax Invoice Management System (eTIMS), which will be tightly integrated with digital payment platforms such as M-Pesa, alongside a major upgrade of the authority’s core iTax platform.
The shift signals a transition from traditional post-declaration tax enforcement to a real-time, transaction-based compliance model, a move analysts say could fundamentally reshape revenue collection in East Africa’s largest economy.
Under the upgraded eTIMS framework, businesses will be required to transmit invoices instantly through multiple channels, including mobile apps, web portals, USSD and APIs. Each transaction will be visible to the tax authority in real time, effectively capturing tax obligations at the point of sale.
By linking invoicing directly with payment systems, including mobile money providers, the platform will automatically generate Payment Registration Numbers (PRNs) and enable immediate tax settlement.
KRA’s Commissioner for Micro and Small Taxpayers, George Obell, said the integration is designed to eliminate delays between invoicing and tax remittance, a gap long associated with under-reporting.
“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.
A central feature of the reforms is the automation of tax filing. Sales data captured through eTIMS will feed directly into taxpayer accounts, allowing returns to be pre-populated.
“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.
“With real-time monitoring and advanced analytics, KRA will be able to flag inconsistencies as they occur, rather than months or years later.”
The approach aligns Kenya with global trends, where tax authorities are increasingly adopting predictive compliance systems powered by artificial intelligence and big data.
Alongside eTIMS, KRA is modernising the iTax system into a fully integrated, API-driven platform capable of interfacing with financial institutions, government databases and third-party systems.
The new architecture, supported by platforms such as EAPI and GavaConnect, is expected to deliver a more seamless user experience across registration, filing and payment processes.
Officials say the system will introduce a “Taxpayer 360” model, combining risk profiling and AI analytics to detect non-compliance and forecast revenue trends more accurately.
KRA is also investing in cloud-enabled infrastructure designed to deliver up to 99.8% uptime, addressing long-standing complaints about system outages during peak filing periods.
Automation will extend to audits, refunds and compliance workflows, reducing manual intervention and accelerating processing timelines.
The reforms form part of a broader government strategy to boost domestic revenue amid fiscal pressures and rising public debt.
Since establishing its Micro and Small Taxpayers unit in 2024, KRA has registered more than 511,000 new taxpayers and is targeting an additional 320,000 in the next phase.
The authority is also training 3,500 agents to support compliance nationwide, working with county governments, trade associations and business hubs to bring informal businesses into the formal economy.
The digital push comes alongside proposals to expand value-added tax (VAT) coverage.
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Currently, only businesses with an annual turnover exceeding Sh5 million are required to register for VAT, leaving a large portion of the economy outside the tax net.
The government is now seeking to raise VAT-to-GDP from 4% to 6%, with long-term ambitions to match regional peers such as Uganda, Rwanda and Tanzania, where the ratio averages around 9%.
If implemented, the reforms could significantly broaden the tax base but may also increase compliance costs for small businesses, a balance that policymakers will need to manage carefully.
For businesses, the shift promises reduced paperwork, faster processing and greater predictability. For the government, it offers a powerful tool to curb revenue leakages, improve transparency and stabilise public finances.
However, experts caution that the success of the reforms will depend on digital literacy, system reliability, and how effectively small enterprises adapt to real-time reporting requirements.
