Kenya to Leverage AI and Machine Learning for Tax Evasion Detection

The Kenya Revenue Authority (KRA) is set to harness the power of artificial intelligence (AI) and machine learning (ML) to tackle tax evasion and enhance the country’s tax collection efforts. During the 2024 KRA Annual Summit, KRA Commissioner General Humphrey Wattanga emphasized the transformative potential of these technologies in analyzing large datasets to identify tax evasion patterns, optimize resource allocation, and forecast future revenue streams.

“Integrating AI and machine learning will not only improve tax collection but also foster trust and transparency within the tax system,” Wattanga stated. The initiative aligns with Kenya’s broader digital strategy to modernize its tax system and drive efficiency in domestic resource mobilization.

Kenya’s Prime Cabinet Secretary, Musalia Mudavadi, echoed these sentiments, highlighting the need for tax administrations to adopt technology to streamline trade and enhance revenue generation. Mudavadi also noted that using electronic invoicing systems helps formalize the informal sector, expanding the tax base and increasing domestic resource collection.

Over the years, the Kenyan government, alongside KRA, has implemented digital solutions such as iTax and the Integrated Customs Management System (iCMS) to simplify tax filing and customs clearance. These efforts have laid the foundation for more advanced technologies like AI and ML to be integrated into the tax administration process.

Despite these advances, a 2022 report revealed significant gaps in corporate tax compliance in Kenya. Out of the 759,164 registered companies, only 84,428 paid corporate taxes by the end of June 2022, resulting in a compliance rate of just 11.12%. The deployment of AI is expected to enhance tax compliance and address these shortcomings.

Kenya’s push to adopt AI in tax administration is part of a broader ambition to position itself as a leader in the digital economy. In April 2024, the Kenyan government, in collaboration with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, launched a project to develop a National Artificial Intelligence Strategy. The initiative brought together stakeholders to identify gaps, explore existing AI efforts, and set priorities for the strategy’s development.

Furthering its digital transformation agenda, Kenya announced in September 2024 that it would update its Information and Communications Technology (ICT) policy for the first time in 26 years. The country’s ICT Sector Working Group (SWG) submitted key recommendations to the Ministry of Information, Communications, and the Digital Economy, focusing on policy reforms that align Kenya’s ICT landscape with evolving global trends.

The integration of AI and ML into Kenya’s tax system marks a significant step toward improving the efficiency and transparency of tax collection, positioning the country at the forefront of technological innovation in public sector management.