Digital transformation is a priority of government agencies worldwide, with tax collection authorities at the forefront of a global trend toward digital tax administration to streamline tax processes, improve compliance, enhance data management and analysis, and foster collaboration between tax administrations and other government agencies at the country level.
In Kenya, the Kenya Revenue Authority (KRA) is increasingly leveraging technology to strengthen the collection of indirect and customs taxes. Recently, KRA announced the introduction of “WhatsApp tax invoicing,” which will provide automated methods to manage indirect tax compliance processes in response to real-time reporting requirements as the authority seeks to close the national VAT gaps.
Driven by globalization and emerging digital frontiers, especially Big Data, Cloud Computing, Artificial Intelligence (AI), Machine learning and the Internet of Things (IoT), KRA has announced that it is aiming to build and test a WhatsApp chatbot and virtual network that would enable business and companies of all kinds to exchange electronic invoices with each other by establishing a secure, open framework for delivering e-invoices between service providers and customers.
How KRA plans to tax Kenyans on WhatsApp
The WhatsApp chatbot, which refers to a computer program that simulates and processes human conversation, will be integrated via the WhatsApp Business Platform. It will automatically respond to various supplier and buyer communications and queries when generating the e-invoices and transmitting them to the authority’s electronic Tax Invoice Management System (eTIMS).
“The implication of this programme is the simplification of tax processes. With the bot, you will be able to generate a tax invoice as easily as you can send a message, a video, or a photo through WhatsApp,” said Hakamba Wangwe, KRA’s Project Manager for the Tax Invoice Management System (TIMS ) and Head Taxation of Digital Economy.
This initiative aims to address the disconnect between the digital economy and the domestic tax system by reducing VAT fraud to increase government revenues. VAT is an indirect tax paid by consumers of taxable goods and services in Kenya, including those imported into the country.
Until recently, businesses using WhatsApp Business to sell their products have largely operated without being required to pay taxes on their sales. With the introduction of WhatsApp e-invoicing and direct interactions with KRA, these businesses will now be required to include the standard 16% VAT in their pricing and maintain proper records for all transactions despite the e-invoices being serially numbered and generated from eTIMS.
Business owners will now need to complete VAT returns monthly, which must be submitted on or before the 20th day of the following month. This includes both the deductions on purchases and the VAT collected on sales.
While collecting and managing taxes is essential for strengthening a country’s financial stability, this introduction of VAT on e-commerce sales will affect the relative prices of goods and services. Traders may face increased tax and compliance costs, likely leading to higher prices for goods and services, which could impact household budgets and purchasing power.
