National news outlets and social media platforms have recently been abuzz with regard to the National Government’s proposed policies to further boost revenue collection and stimulate economic recovery. Among other key proposed interventions and in a bid to catch those evading payments, the National Government, through its Draft 2023 Budget Policy Statement, is seeking to integrate the Kenya Revenue Authority’s Tax system with Telecommunication companies (TELCOS). Essentially, what this means is that the taxpayer’s information on mobile money platforms will be closely monitored by the Kenya Revenue Authority (KRA) in order to ensure tax compliance.

One might argue that KRA’s proposal to link its systems with Telcos to monitor taxpayer’s transactions on mobile money platforms falls under the purview of Section 58 of the Tax Procedures Act, No. 29 of 2015 (TPA). Section 58 provides that, “an authorized officer may inquire into the affairs of a person under any tax law, and shall at all times have full and free access to all lands, buildings, places to inspect all goods, equipment, devices and records, whether in the custody or control of a public officer, or of a body corporate or of any other person, and may make extracts from or copies of those records.”

This policy recommendation comes in wake of the judgement issued by the High Court on 20th February, 2020 in Petition Number 156 of 2017 Okiya Omtatah Okoiti v. The Hon. Attorney General and the Kenya Revenue Authority. In this case, the Petitioner contended that sections 57, 58(2), 59 and 99 of the Tax Procedure Act were inconsistent with the Constitution of Kenya, 2010 as the sections infringed on the right to privacy for individuals. The Petitioner also cited instances in which the KRA abused the application of these provisions against select individuals in the political sphere, claiming that the KRA's powers under those provisions were used for political intimidation and harassment.

The Court dismissed the Petitioner's claim, stating that the KRA’s enforcement powers are legal and intended to allow the KRA to determine the tax liability of the relevant taxpayer. In addition, the Court stated that the KRA’s powers are not intended to infringe on an individual's privacy when it comes to private affairs. Furthermore, the Court noted that section 6 of the Tax Procedures Act requires the KRA to, “…keep all information confidential unless specific disclosure is permitted under the express provisions of section 6(2)”. The import of this decision essentially confirms that the KRA has the authority to obtain information from a variety of sources in order to determine an individual’s tax liability.

The ramifications of national tax agencies having unfettered access to citizen’s personal financial accounts raises a number of important and complex issues particularly in relation to privacy and exercise of government power. While this type of access may be necessary to ensure compliance with tax laws and regulations, it may also precipitate potential abuse of power and violations of citizen’s rights.

Pros and Cons: Weighing the Balance

One of the key benefits of the proposed policy is that it would undoubtedly facilitate the government’s efforts in tax collection and enforcement of tax laws. Equipped with direct access to citizens' financial information, tax agencies would be able to efficiently identify tax evaders and take appropriate action with respect to collection of taxes owed. This will inevitably result in increased revenue for the government which could channeled towards the funding of important public services and other development projects.

On the flip side, there are also a number of potential drawbacks to watch out for. One of the most significant concerns is related to the right to privacy. On this front, Section 6 of the TPA provides that, “…in relation to the administration of a tax law, the commissioner or an authorized person shall protect the confidentiality of documents or information obtained in the course of administering the tax law”. Although couched in terms to advance the right to privacy, this provision does little to alleviate the disquietude that has recently been expressed over the government having access to the taxpayer’s personal financial information. A marred perception of the intention behind the policy will make taxpayers less inclined to comply with tax laws and more likely to engage in tax evasion.

Another potential drawback lies in the potential abuse of government power. Without proper oversight and regulations in place, tax agencies are open to usurp the access granted to target individuals or groups for political or personal reasons as was raised in Petition Number 156 of 2017. This could result in citizens being subjected to harassment or unjust legal action.

Further, given that not all Kenyans have equal access to financial services noting that a significant proportion lack bank accounts and rely on mobile money platforms for almost all their transactions, such policies may disproportionately affect them.

In conclusion, it is imperative that the potential benefits of the proposed policy are balanced against the serious concerns outlined above. It is crucial that any policy that grants national tax agencies such access is carefully crafted to ensure that the right to privacy and all other civil liberties are protected. These considerations ought to include strong safeguards, oversight and accountability mechanisms to ensure that these policies are implemented in a responsible and transparent manner.