The Kenya Revenue Authority (KRA) has heightened tax administrative measures to enhance compliance and broaden the tax base. The move primarily focuses on micro, small, and medium-sized enterprises, commonly referred to as MSMEs.The informal sector, which largely comprises MSMEs, is the largest contributor of employment opportunities in Kenya, according to the Economic Survey, 2025. They also make a sizeable contribution to the GDP.There has, however, been concern that, despite MSMEs being key drivers of the economy, their direct contribution to the tax kitty has fallen below expectations. This has been attributed to, among other factors, low awareness and the complexity of tax laws.The KRA has rolled out various programmes to enhance taxpayer education and awareness. This is in addition to substantial investment in technology to simplify and reduce the cost of compliance, which is expected to promote voluntary compliance.It is also notable that KRA has heightened the level of compliance audits or reviews on MSMEs. This is enabled by the use of data analytics and other advanced methods that help in identifying compliance gaps.The automation of tax return filing and payment has greatly reduced manual review and analysis of taxpayers’ financial records, which has enhanced efficiency, freeing up capacity that was hitherto consumed in manual review of documents.Another high-impact administrative measure rolled out by KRA is eTIMS, which ensures taxpayers digitally capture their transactions and in a real-time basis, relay the data to the KRA.The enactment of a legal requirement that all invoices must be issued through eTIMS or a TIMS-compliant device has provided KRA visibility of taxpayers’ transactions. The initial implementation stages faced challenges as taxpayers adjusted their operations and updated their systems.Effective 1 January 2026, the KRA has issued a public notice indicating that all income and expenses declared in tax returns will be digitally validated against eTIMS and customs data.This is likely to face challenges, particularly for late adopters of eTIMS requirements.There has been a notable increase in tax compliance audits on MSMEs based on the number of tax appeals filed at the Tax Appeals Tribunal (TAT). A worrying trend has, however, been the number of appeals that taxpayers have lost due to failure to meet the requirements of lodging an appeal at the TAT.A substantial number of appeals have also been lost by taxpayers due to the late filing of appeals, among other legal and procedural technicalities.Unfortunately, defects in tax appeals leave the Tribunal with no option but to make a judgment focused on administrative aspects as opposed to a review of the technical merits of the appeal.These gaps are contributed by a myriad of reasons, including limited knowledge on tax disputes requirements by the affected taxpayers or representation by persons who do not possess the requisite knowledge and experience in handling tax matters. As such, effective dispute resolution remains core in ensuring fairness in taxation.The Tax Appeals Tribunal Act defines a tax agent as a person who acts on behalf of another person on matters relating to tax and is registered as such by KRA. The Act further states that for hearing of proceedings before the Tribunal, the appellant may appear in person or be represented by a tax agent or by an advocate of the High Court of Kenya.Failure to have a Tax Agents Committee that vets and approves tax agents has been a setback in ensuring only licensed tax agents represent taxpayers. This has had an adverse impact, more so for MSMEs who at times rely on persons who are not qualified to handle tax matters when objecting at the TAT.The Tax Procedures Act (TPA) provides that a person, other than a tax agent, shall not represent another person as that other person’s tax agent or offer assistance to another person for a reward in respect of that other person’s rights or obligations under a tax law. The restriction, however, excludes legal practitioners acting in the ordinary course of their profession.The TPA provides that the functions of a tax agent include, but are not limited to, preparing and submitting tax returns on behalf of a taxpayer; liaising with the KRA on behalf of a taxpayer on matters relating to tax; or advising and representing a taxpayer in tax matters before the Tribunal.An advocate of the High Court acting in the ordinary course of the advocate’s profession is not required to register as a tax agent to perform the highlighted functions.It is the responsibility of the Treasury CS, by notice in the Gazette, to appoint a Tax Agents’ Committee. It is important that the committee is put in place as soon as possible to close this gap. Having qualified and licensed tax agents will ensure all taxpayers have a fair chance of submitting valid and timely objections and appeals to the KRA and the TAT respectively in case of a tax dispute.The writer is an Associate Director at Ernst & Young LLP (EY). The views expressed herein are not necessarily those of EY Provided by SyndiGate Media Inc. (Syndigate.info).
