Towards more effective tax investigations with the rise of mobile money payments

Technological advances can transform the environment in which governments enforce compliance with tax legislation and collect tax revenues. This includes the emergence and rise of mobile money payments, which have been changing the financial landscape in Africa since the launch of the mobile money transfer platform, M-Pesa, in Kenya in 2007. The emergence of this payment platform may present unique opportunities for driving tax compliance and tax investigations. This chapter is aimed at stimulating debate on how this emerging platform can be used for providing additional information to be used by the tax administration. It uses Kenya as a case study and highlights how these platforms can provide additional information that can be used for tracking and monitoring tax payers’ activities, to enable tax administrations to determine whether tax payers’ declarations in their tax returns reflect their economic activities. The chapter also highlights how it can provide information on individuals and businesses that, by the nature of their activities, ought to be included in the tax base, and also to provide information for identifying individuals and businesses that do not file tax returns despite being economically active. The chapter also highlights that the real-time data that could be made available to tax administrations could be useful for compliance monitoring, and provide a more reliable audit trail and, finally, the potential challenges.