Experts urge wider digital tax use as Kenya eyes Sh4.7tn budget

NAIROBI, Kenya, Apr 15 – Tax experts are urging the government to fast-track adoption of digital tax systems, particularly the electronic Tax Invoice Management System (eTIMS), as the country prepares for a record Sh4.7 trillion budget for the 2026/27 financial year.

Speaking during the Ernst & Young (EY) 2026/2027 pre-budget media briefing, Francis Kamau, Tax Leader and Partner for East Africa, said expanding the tax base through technology is critical given Kenya’s reliance on a small pool of compliant taxpayers.

Despite more than 19 million registered taxpayers and over 22 million PIN holders, only about three million individuals in the formal sector alongside roughly 10,000 corporates contribute the bulk of revenues.

“About three million taxpayers are effectively supporting close to 19 million who should be paying taxes,” he said.

“That imbalance is not sustainable, especially as the government moves toward a Sh4.7 trillion budget.”

Kamau identified eTIMS as a key tool to close this gap, noting that full enforcement could significantly expand the tax net by capturing transactions in real time.

Data shows adoption of the system has improved, with more than 323,000 taxpayers onboarded by September 2024, rising to over 500,000 by late 2025, according to the Kenya Revenue Authority.

However, uptake remains uneven. Earlier in the rollout, fewer than one percent of eligible businesses had signed up by January 2024, reflecting initial resistance and technological barriers.

Even among registered users, compliance challenges persist, with only about 49 percent actively transmitting invoices through the system.

Sector-specific adoption has also been gradual, with more than 500 fuel stations onboarded to the eTIMS fuel module by early 2026, representing about 16 percent of the sector.

Experts say the impact of eTIMS will depend not just on registration numbers but on consistent usage, as the system enables real-time transmission of invoice data, allowing authorities to match declared income with actual transactions.

From January 2026, the taxman began validating returns using eTIMS data, meaning expenses without compliant electronic invoices risk being disallowed—a move expected to push businesses toward full compliance.