The Kenya Revenue Authority (KRA) is intensifying its use of digital financial records to identify undeclared income, placing employees, businesses and other taxpayers under closer scrutiny as the government seeks to improve tax compliance and revenue collection.
Payroll records, mobile money transactions, electronic tax invoices, withholding tax information and customs data are among the records that can be used to verify whether taxpayers are accurately reporting their earnings and business income.
The approach means that discrepancies between declared income and information available to the tax authority could trigger questions, requests for supporting documents or further compliance checks.
M-Pesa transactions under scrutiny
In March 2026, KRA Deputy Commissioner Maurice Oray said the authority would pay closer attention to mobile money transactions, particularly where individuals file nil returns despite evidence of financial activity.
The authority's approach is intended to establish whether taxpayers who report no taxable income are meeting their obligations, taking into account information available to KRA.
Businesses receiving payments through M-Pesa PayBill and Till numbers are also subject to scrutiny. Traders who underreport sales or attempt to conceal business activity by changing payment accounts risk attracting further attention from the tax authority.
However, money moving through a mobile wallet does not automatically constitute taxable income. Transfers between personal accounts, loans, gifts, reimbursements and other non-income transactions may require different treatment from payments received for goods or services.
Taxpayers should therefore retain transaction records and supporting documents that explain the source and purpose of significant transfers.
How KRa can use digital records to verify business income
In April 2026, Business Daily reported that KRA was using transaction records and electronic invoicing information to identify businesses whose declared income did not appear consistent with their commercial activities.
Electronic records can help tax officials compare purchases, sales, invoices and reported earnings to establish whether a business is declaring its income accurately.
For example, a trader whose electronic invoices and payment records indicate substantial sales, but whose tax returns report significantly lower revenue, may be asked to explain the difference.
Businesses are therefore expected to maintain accurate sales records, issue the required electronic tax invoices and ensure that their tax returns reflect their actual taxable activities.
A difference between transaction volumes and declared income is not, by itself, proof of tax evasion. The circumstances of each transaction and the applicable tax rules remain important in determining whether additional tax is due.
Payroll records put employment income under review
Payroll information is another important tool in KRA's compliance efforts.
Through employment records and Pay As You Earn (PAYE) returns, the authority can compare information reported by employers with the salaries and benefits declared by employees.
The checks can help identify cases where employers fail to declare the full remuneration paid to workers or do not remit the required PAYE deductions.
Employees should ensure that their tax returns accurately reflect their employment income and that the information corresponds with their payslips, annual employment tax certificates and other relevant records.
Where discrepancies arise, employees may need to obtain clarification from their employers or provide supporting documents to explain the figures reported.
Tax returns face additional digital cross-checks
KRA has also introduced changes requiring income tax returns to be checked against electronic tax invoices, withholding tax records and customs import information.
The checks began on January 1, 2026, for returns covering the 2025 year of income.
The changes are designed to strengthen verification by allowing the authority to compare information submitted through different tax and financial reporting systems.
For businesses, this makes the reconciliation of sales, purchases, withholding tax credits and other relevant records particularly important when preparing annual returns.
Taxpayers should also confirm that eligible withholding tax credits are properly reflected and supported by the relevant documentation.
What employees and businesses should do
As digital verification expands, taxpayers can reduce avoidable compliance problems by keeping accurate and accessible financial records.
Employees should retain payslips, employment tax certificates and documents explaining significant non-salary transactions where necessary.
Business owners should maintain proper books of account, reconcile mobile money receipts with recorded sales, issue required electronic invoices and ensure that declared income matches their records.
Individuals who have filed nil returns should establish whether they had taxable income during the relevant period rather than assuming that limited activity or the absence of formal employment automatically means no tax is payable.
Where a return contains errors, taxpayers should consult KRA's official guidance on correcting or amending the relevant filing.
Financial transparency becomes increasingly important
KRA's growing reliance on digital information reflects a wider shift towards data-driven tax administration, in which financial records can be compared across multiple reporting systems.
For taxpayers, the central issue is not simply how much money passes through a bank account or mobile wallet, but whether the nature and source of those transactions have been correctly accounted for under the law.
Accurate records can help taxpayers explain legitimate transactions, claim eligible deductions or credits and respond to questions from the authority.
As scrutiny increases, employees and businesses alike will need to ensure that their financial records and tax declarations are consistent, complete and supported by evidence.
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