Ndii Explains How Govt Will Use Paybills and Tills for Tax Collection from Small Businesses
Moses Kuria recently announced that by December 25, 2024, the government plans to implement a requirement for small businesses to use paybills and tills as virtual electronic tax registers (ETRs). This was further clarified by Dr. David Ndii, Chairman of the Council of Economic Advisors, who provided insight into how the new system would operate.
During the NCBA Bank Economic Forum 2024, Ndii explained the rationale behind this initiative and described how paying bills and tills will help broaden the tax base.
Kuria highlighted that every transaction processed through these digital methods would be automatically logged for taxation purposes.
So, how will this system function, and how will the government collect taxes from paybills and tills? Ndii outlined that the Kenya Revenue Authority (KRA) will use software that integrates payment service providers with pay bills and till numbers, ensuring that all transactions enter the system for taxation.
“This is a digital ETR—a software that connects payments made by service providers to cash registers. Whether a payment is made in cash or by card, it enters the register and includes an ETR,” Ndii explained.
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He further added, “Behind these cash registers, there’s a pay bill number. In some businesses, transactions don’t go into the same system, which is why this updated approach is essential.”
Ndii expressed confidence that this system would expand the tax base, citing that the government has already tested similar methods and seen significant success.
“We know this approach works because we’ve implemented single-pay bills for all government payments,” Ndii noted.
Moses Kuria also pointed out that, despite 16 million Kenyans working in the informal sector, the Kenya Revenue Authority (KRA) collected only Ksh12 billion in income tax from them, as opposed to Ksh500 billion from the three million formally employed citizens.
Currently, VAT Regulations 2020 require businesses to record transactions using electronic tax registers (ETRs).
Under the existing system, businesses manually enter tax data, but with the new system launching in December, tax data will be recorded automatically upon payment.
This change aims to close loopholes, eliminating underreporting and discrepancies.
Ndii Explains How Govt Will Use Paybills and Tills for Tax Collection from Small Businesses
