Why tech industry firms are set for a windfall in State’s new revenue plan

Tech companies

Tech companies are set for a windfall in government plan to take service delivery digital.

Photo credit: File | Nation Media Group

The government’s move to ride on technology to cure its revenue collection headache and grow its tax base has left the door ajar for tech firms, which are now set to reap handsomely.

In its draft Medium Term Revenue Strategy, which was published last week and is currently incorporating public views, the National Treasury has underlined the role technology would play in various initiatives including going after the would-be “hard to tax” sectors of the economy.

The largely informal sectors have been characterised as invincible to the taxman with little or no record keeping making it difficult to track financial misdeeds if any.

At the same time, the exchequer notes that most individuals in the sector believe they have no obligation to pay taxes based on their self-generated incomes.

To ensure that these group hands over their pound of flesh, the government is exploring use of information technology, data sharing, and utilisation of third-party information to net elusive taxpayers.

“The hard-to-tax sectors are characterised by informality, limited record-keeping, lack of visibility of transactions by taxpayers in these sectors, and inadequate regulation. Due to the challenging business dynamics in the Kenyan economy, the hard-to-tax sectors continue to grow,” said the National Treasury.

The government is looking to leverage on technologies such as mobile applications and USSD codes to simplify tax payments and the filing of returns by payers.

Moreover, the Treasury will seek amendments to the Data Protection Act with the view of exempting the Kenya Revenue Authority (KRA) from provisions of the Act for ease of information access. This would allow the taxman to deploy technologies to access data on persons and businesses including mobile money and bank transaction records to bring such persons into the tax net.

Beyond opportunities to digitise and automate revenue sourcing and collection, the government has onboarded most of its services to the e-Citizen digital platform.

An estimated 7,453 services are for instance on the platform as the government seeks to bring services closer to its citizens.

The setup of public internet hotspots as complementary services to enable citizens to link up to automated government services, has further added to the move towards digitisation and automation.

Combined, the automation and digitisation of revenue processes have opened up space for technology firms to do business with the government, both at the national and county levels.

“The government will always be the biggest customer in any country and Kenya is no exception. When we see it leveraging technology, this is a good thing for businesses in the tech space. If one is in the tech industry and offering digital and automation services, this is the opportunity,” Mr Bobby Gadhia, a consultant working with tech startups told Smart Business.

To benefit from opportunities on offer, however, Gadhia reckons tech firms will need to ensure they are visible and ready to work while also affirming their credibility once contracted by the government.

“You can’t just screw up on a tender and go away. Those days are long gone,” Mr Gadhia added.

Already, governments at both levels have been seeking to establish close ties with the tech industry including partnerships for purposes that cover collaboration on joint projects.

The Nairobi city county government has, for instance, established a digital economy and startup sector to support innovation through outcome-based programmes.

“The approach taken by the county has been organising startups into sectors to enable systematic engagement with the county in providing technology solutions to various sectors. We have for instance collaborated with Liquid technologies for smart solutions on water, Villgro Africa in health and Africa’s Talking for bulk SMS and USSD solutions among many other opportunities,” noted Victor Agolla, the county chief officer of Digital Economy and Startups.

The devolved unit seeks to become the premier smart city by leveraging service delivery and local solutions.

Nairobi’s goal is to have startups and tech firms accessing county government procurement opportunities including revenue mobilisation.

To boost digitisation and automation, institutions such as the Central Bank of Kenya (CBK) have recently raised cash limits by mobile money platforms to Sh500,000.

The higher transaction limit will allow payments for government services which are mostly done via the mobile money platform M-Pesa- the mobile money service owned by Safaricom.

“The new measures are also expected to support efforts by the government to digitise payments for services offered to Kenyans,” the CBK stated.

Increased mobile money deals are expected to hasten Kenya’s switch to a cashless economy whose momentum was underlined by the Covid-19 pandemic. Additionally, the government has been laying down infrastructure to elevate the role of technology across the board.

Over the next five years, for instance, Kenya is expected to support the extension of National Optic Fibre Backbone infrastructure work to ensure universal broadband availability.

According to the 2023 Budget Policy Statement, the government is set to further digitise essential services to place the role of technology and its related enterprises at the forefront.

“Government will also digitise and automate all critical government processes throughout the country, with a view of bringing at least 80 per cent of all government services online for greater convenience to citizens. To achieve this, the government will revamp Huduma Centre Infrastructure to enable the end-to-end physical and digital access to government services under the one-stop-shop platforms,” the National Treasury stated.

Further, the government has mulled the establishment of a Presidential Advisory on Science and Technology Policy to ensure the State has a wholesome approach to technological development and use and build necessary capacities across the government.