Gov't to deploy AI algorithm in tax collection to add 2.5 million new taxpayers

This is according to Dr. David Ndii, the Chair of the President’s Economic Council. According to Ndii, the administrative burden of collecting small taxes has been addressed by mobile penetration in the country, making it easier for the government to monitor economic transactions.

The government now says it has the capability to assess peoples' incomes in the informal sector.

The government is set to leverage Artificial Intelligence and digital penetration to increase tax revenue collection in the country.

According to the President’s economic advisor, David Ndii, digital penetration in the country has made it possible for the government to assess the income of people in the informal sector.

The government is now in the process of building a machine learning model to do tax assessment, following the success of a previous model which has been used to calculate and do health premium assessment, as well as another model which calculates the credit score for Kenyans on the Hustler Fund.

"If you go to your SHA portal and you are not on payroll, it has to determine your premium, which has to be 2.75 percent of your income and you're not on payroll. So how are we determining your premiums for those non-formal people?" Ndii posed. 

"If you go there and put your ID, it will give you an annual premium. How did it arrive at that annual premium? There has to be an income assessment. We have the capability to assess income of people in the informal sector already." 

Speaking at the annual NCBA Economic Forum, Ndii noted that the government intends to leapfrog the traditional models of tax collection and switch to the use of algorithms.

This, he argues, will bring on board over 2.5 million taxpayers who are not within the tax net yet have an equivalent income to those on the payroll, underscoring that the government is missing 98 per cent of people outside payroll, with the tax system only targeting employers and their workers, terming it a lazy approach.

"We estimate that there are 2.5 million taxpayers out there with equivalent income to people on payroll. They are doctors in private practice, and if people are in the same labour market with the same capacity and education skills, it follows that because you are in the same integrated market, what people in this room are earning, the people who are not on payroll with the exact same profile are earning about the same. Proof: go and check where they live, they are your neighbours," he added. 

The sentiments come at a time when NCBA has revised its economic outlook for 2025 to 5 percent, but the bank warns that any attempt to raise taxes in the coming fiscal year could face serious public pushback.

"Given the current socio-political context, any attempt to raise new taxes in the 2026/27 financial year is likely to face headwinds from the public. Again, I hope the policy maker in the room has heard that any attempts to raise taxes could be problematic," John Gachora, Group MD, NCBA Bank, said.