Balancing Inclusion Through Mobile Money and Taxation of the Previously Untaxed

Governments’ enthusiasm of mobile money as a means to include the previously unbanked, has always had a second side to the coin – the hope that inclusion will result in more revenue from taxation. Small businesses in Kenya are increasingly rejecting mobile money payments in favour of cash as they try to avoid aggressive tax compliance measures. The shift follows the deployment of 1,400 paramilitary-trained field officers by the Kenya Revenue Authority (KRA) across the country at the end of September. The field officers, known as Revenue Service Assistants, have been visiting businesses to ensure their compliance with tax requirements. The KRA has said that it will now seek information on the businesses opting out of mobile money payments from Safaricom, the telco that operates mobile money service M-Pesa and its business-specific payment solution Lipa Na M-Pesa (Pay with M-Pesa). M-Pesa has a 99% share of the mobile money market in Kenya. M-Pesa achieved 30m active customers in March last year, and more than 600,000 merchants received payments through Lipa Na M-Pesa in the financial year ended March 2023.