The Future of Tax Compliance: How Technology is Reshaping Revenue Collection in Kenya and Beyond

As governments worldwide race to modernize their tax systems, the Kenya Revenue Authority (KRA) is emerging as a regional leader in digital transformation. From manual filing to auto-populated returns, and ultimately, real-time tax compliance and reporting, the future of tax compliance is being shaped by technology and businesses must adapt or risk falling behind.

In developed economies, revenue authorities are pushing the boundaries of digital transformation. According to the Organization for Economic Co-operation and Development (OECD), over 80% of tax administrations have developed Application Programming Interfaces (APIs) to integrate tax systems with third-party platforms. Around 60% offer full prefilling of personal income tax returns, and nearly 40% can prefill Value Added Tax (VAT) returns. Estonia, for example, enables near real-time tax refunds, while the United Kingdom (UK) uses digital IDs (Digital Identification) for secure access to tax services.

Artificial Intelligence (AI) is being deployed to enhance compliance management, detect fraud in real time, and improve taxpayer services. Exemplifying this is Italy’s revenue authority which has developed an algorithm known as VeRa, a tool tasked with cross-referencing tax filings, property records, and bank data to identify discrepancies and flag high-risk taxpayers.

Big data analytics tools are being deployed by tax authorities to forecast revenue, identify trends, and personalize taxpayer engagement. Poland’s STIR (System Teleinformatyczny Izby Rozliczeniowej - Teleinformatic System of the Clearing House in English) analyzes daily banking and clearinghouse data to detect potential carousel frauds in near real time, enabling swift enforcement by the National Revenue Administration.

Blockchain is being explored for tamper-proof audit trails. In China, blockchain-based electronic invoicing uses smart contracts and encrypted algorithms to ensure secure issuance, storage, and transmission of documents. The system offers complete traceability and tamper resistance, making post-fact data manipulation virtually impossible.

Natural Language Processing (NLP) is also gaining traction, helping tax authorities and businesses monitor legislative changes and automate compliance workflows.

While Kenya may not currently match these capabilities, it is rapidly narrowing the gap. Prior to migration to the iTax platform back in August 2015, tax compliance in Kenya was a paper-heavy, time-consuming process. Today, KRA has embraced digital innovation, collecting Ksh. 2.57 trillion in the 2024/25 fiscal year and targets Ksh. 2.75 trillion in ordinary revenue for the 2025/2026 fiscal year. With new tax law changes introduced by the Finance Act, 2025 forecast to yield only about Ksh 25–30 billion in additional revenue, KRA is expected to rely heavily on technology-driven tax administration efforts to meet its ambitious growth and compliance objectives. This means tightening enforcement through digital means to raise the budgeted revenue without imposing significant new taxes.

The rollout of platforms like GavaConnect, an API-driven solution that integrates tax compliance into everyday business operations, and eTIMS (Electronic Tax Invoice Management System), which has revolutionized VAT reporting, reflects a broader shift toward proactive enforcement. These tools not only improve efficiency but also enhance transparency and taxpayer trust.

Kenya’s digital tax transformation is part of a wider East African trend. Neighboring countries are implementing similar tech-driven initiatives to modernize tax administration and improve compliance within their jurisdictions. For example, Tanzania’s excise revenue jumped over 80% since introducing the Electronic Tax Stamp System (ETS), while Uganda saw a 30% rise in collections following its rollout of e-invoicing and ETS. Rwanda’s flexible e-invoicing system, tailored to businesses of all sizes, has achieved near-total VAT invoice capture and is considered a regional model.

As KRA intensifies its digital oversight, businesses in Kenya are increasingly recognizing the need for a dedicated tax technology function as a strategic capability that blends tax expertise with digital innovation.

This function is emerging to bridge the growing gap between traditional compliance processes and the expectations of a modern, tech-enabled revenue authority. It enables organizations to align with real-time enforcement by automating reconciliation and reporting, while also staying ahead of regulatory changes through tools like Natural Language Processing. By leveraging analytics, businesses can respond effectively to data-driven audits, reduce error rates, and minimize exposure. Additionally, automating tax workflows enhances operational efficiency, and the insights gained from tax data help optimize decision-making and manage exposures more strategically.

In Kenya’s fast-digitizing economy, the KRA is setting the pace for revenue authorities across Africa, driven by a bold vision to emulate the best practices of advanced economies. Through the adoption of cutting-edge technologies ranging from real-time data integration and AI-driven risk analytics to tamper-proof systems, KRA is redefining tax administration.

In this new era, tax technology is no longer a back-office function, it is a strategic enabler. Companies that invest in robust tax tech capabilities are better positioned to navigate regulatory changes, leverage tax optimisation as a growth catalyst, avoid penalties, and unlock new operational efficiencies.

Anthony Munyare is a manager in the Tax Technology Consulting team at Deloitte East Africa. The views presented are his own and not necessarily those of Deloitte. He can be reached at amunyare@deloitte.co.ke.

This article was originially published on Business Daily here.