Privacy in mobile money is paramount

Wednesday, February 1st, 2023 05:30 | By
Privacy in mobile money is paramount
Mobile money services in Kenya. PHOTO/Courtesy

The Kenya Revenue Authority (KRA) has signalled its intention to start spying on mobile money transactions by integrating its tax system with mobile money platforms in a move aimed at reducing tax evasion.

Much as this will shore up tax revenues, it also raises questions about privacy, which need to be addressed before the new system is rolled out. State plans to set the country free from public debt over time, and one of the measures it targets is spying on digital transactions in its quest to net taxes from the cash transfers.

This is part of a broader move to expand the tax base by targeting the vibrancy of mobile money transactions, the growing number of untapped SMEs and remittances from abroad and from urban areas to rural families.

With close to 500,000 businesses currently using Safaricom’s Lipa na M-Pesa service, for instance, slapping tax on their transactions will be a low-lying fruit for a government that hopes to increase revenue to Sh3 trillion this year. 

However, only seven million people out of 50 million who engage in digital transactions have KRA personal identification numbers (PIN), hence the requirement for all adult phone users to be signed up with the taxman.

 But even as this is done, it must respect data protection rights that citizens are guaranteed in law. Central Bank of Kenya governor Patrick Njoroge estimates that 96 per cent of transactions happen outside bank branches underlining the entrenchment of digital transactions. 

Spying on such transactions is, however, likely to set up the government and KRA for a round of legal battles and class action suits since the move will entail giving information to a third party without the consent of the user and in the absence of a water tight legal regime.

 Even the Telcos targeted to share mobile money data on the business platforms using pay bills and till numbers have previously opposed the move, meaning that there is a lot that Parliament must do to entrench such spying in law.

On the positive side, monitoring transactions will help KRA expand its net to tap tax incomes from the informal sector, including online deals, which is becoming the source of new money and much of whose revenue has fallen outside the ambit of tax measures. The trick will be in balancing legality and privacy.

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