Digital systems hasten service delivery

Kenya’s digital system has helped to speed up assessment and service delivery and made the country’s tax administration more efficient, experts have said.

Currently, taxpayers file their returns electronically, an exercise which can be carried out anywhere anytime with access to the internet.

University of Nairobi (UoN) associate professor of economics and former Central Bank of Kenya (CBK) governor Njuguna Ndung’u the system have led to reduced fraud and tax evasion and improved revenue administration with huge potential gains for the future.

“The private sector, banks and individuals need to adopt the platforms being introduced by the government and government agencies, to receive the range of services and to pay for those services electronically.

This will reduce any room for leakages, and, above all, reduce costs and the time it takes for physical visits to government offices and tax authorities,” said Prof Ndung’u.

An International Monetary Fund (IMF) report authored by Prof Ndung’u titled digitisation in Kenya Revolutionising Tax Design and Revenue Administration, showed that digitalisation has given the Kenya Revenue Authority (KRA) an opportunity to strengthen and revamp its tax enforcement mechanisms through third-party sharing of information.

Currently, the iTax system is linked to the Integrated Financial Management Information System (IFMIS) and Central Bank of Kenya (CBK), and plans are under way to integrate with other systems such as the National Social Security Fund (NSSF), National Health Insurance Fund (NHIF), and the eCitizen digital platform.

This integration will facilitate identification of potential tax defaulters, unregistered businesses and individuals, and increase active taxpayers and tax compliance.

Success story

Experts say financial inclusion in Kenya has been a success story, leading the way with a mobile-phone-based financial services platform, set in motion by the inception of the M-Pesa.

“These innovations have led to a broad retail payment platform, which has made payments more efficient, transparent, and safe, facilitating financial inclusion regardless of income level,” the report said.

The broader platform has been useful for functions including e-commerce, tax payments, and revenue administration.

Digitalisation has also begun to change the way fiscal policy works, with the March 2017 launch of M-Akiba for micro-investment in government securities using the mobile-phone platform.

In the past, experts said the Kenyan national payments system was thought to be adequate, but mobile-phone-based retail payments have provided important lessons and pointed the way forward.

They said in a country such as Kenya, the starting point for financial inclusion is the existence of a financial transactions platform that, in addition to payments, improves and broadens availability of savings and investment.

“This is the innovation that M-Pesa has provided,” they said.

Female adults

Figures from the World Bank’s recently released 2017 Global Findex data showed that Kenya’s financial inclusion hit 82 per cent last year, which is substantially higher than most of African countries.

The data showed that Mauritius recorded 90 per cent financial inclusion for adults aged 15 years and above with South Africa following Kenya at 69 per cent.

The report also indicated that that number of male adults included was higher than that of female adults in all countries except South Africa.

However, the gender gap in financial inclusion seems to have significantly reduced following the mobile financial services revolution across the continent.

This progress is said to have been driven by digital payments, government policies, and a new generation of financial services accessed through mobile phones and the internet.