Kenya is gearing up for one of its most ambitious financial transformations yet. The government has announced plans to use artificial intelligence to recover up to Sh1.3 trillion in unremitted taxes from the informal sector. This bold initiative, revealed by David Ndii, Chairperson of the Presidential Council of Economic Advisers, signals a major shift in how the Kenya Revenue Authority (KRA) will manage tax collection in the years ahead.
The informal sector, which employs nearly 90% of Kenya’s workforce, has always been a challenge for effective taxation. Street vendors, jua kali artisans, and small-scale traders mostly operate in cash and outside the formal banking system, making it difficult for KRA to monitor their income. However, with Kenya’s wide adoption of mobile money services like M-Pesa and Airtel Money, the government now has a digital trail that could change everything.
According to Ndii, the government plans to use AI algorithms to analyze digital transaction patterns and identify taxable income. Instead of relying on manual enforcement, the new system will use real-time monitoring and data analytics to detect irregularities, flag potential non-compliance, and estimate undeclared earnings. This approach represents a move from reactive enforcement to proactive digital oversight.
Treasury officials have already started developing a blueprint for the rollout, which includes phasing out voluntary self-reporting and introducing smart tax tools into Kenya’s existing digital systems. The goal is to bring over 2.5 million informal workers into the tax system by leveraging their mobile money activity as a key data source.
While the potential benefits are huge, the plan has sparked debate. Many experts have raised valid concerns about privacy and data protection, warning that increased monitoring could cross ethical lines if proper safeguards are not enforced. On the other hand, supporters see this as a much-needed step toward fiscal independence, reducing Kenya’s reliance on borrowing and improving public revenue management.
If implemented successfully, Kenya’s AI-driven tax model could set a powerful precedent for other African nations struggling to formalize their informal sectors. It marks the beginning of a new era where technology meets governance to create more transparent, efficient, and fair systems.
The future of taxation is digital, and Kenya is taking the lead.
For businesses looking to stay ahead in this evolving landscape, now is the time to embrace digital transformation in compliance and operations.
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