Nairobi: East African countries are accelerating the digital transformation of their Value Added Tax (VAT) systems to enhance revenue collection, improve tax compliance, and foster sustainable economic growth. This commitment was reinforced during a high-level seminar held in Nairobi, which brought together tax officials, private sector experts, development partners, and regional bodies to explore technology-driven solutions for tax administration.
According to Kenya News Agency, the seminar, themed ‘Driving Smarter VAT Compliance: East Africa’s Digital Leap,’ focused on leveraging digital tools and innovative approaches to strengthen VAT systems that are critical to domestic revenue mobilisation across the region. VAT contributes approximately 30 percent of total tax revenues in many East African countries, but its efficiency often remains below 50 percent due to persistent challenges including fraud, underreporting, and weak enforcement.
Kenya’s Electronic Tax Invoice Management System (E-TIMS) and Uganda
‘s Electronic Fiscal Receipting and Invoicing System (EFRIS) were cited as examples of digital solutions making progress in improving VAT compliance by enabling real-time transaction tracking and reducing opportunities for evasion. However, infrastructural limitations such as poor internet connectivity, especially in rural areas, and the complexity of adapting systems to informal and small-scale businesses were identified as ongoing hurdles.
Speaking at the event, George Obell, a Commissioner for Micro and Small Taxpayers Department at the Kenya Revenue Authority (KRA), noted that while digitalization has expanded the tax base and improved taxpayer services, reforms must remain sensitive to the needs of small and informal businesses, which constitute a significant portion of the economy. ‘Digital innovation is crucial, but it must reflect real business environments to be effective and inclusive,’ he reiterated.
Concurrently, the African Development Bank’s (AfDB) East Africa Regional Director General (DG), K
ennedy Mbekeani, emphasised that digital transformation in tax administration is a multifaceted process involving technology, people, and processes. ‘Technology can optimise human resources by automating routine tasks, freeing staff to focus on strategic activities,’ stated the DG, adding that success depends on quality data and modernised processes, underscoring the importance of investing in data quality and human capital development.
An Executive Director at AfDB from Japan, Takaaki Nomoto, shared insights on Japan’s cautious yet deliberate journey towards digital tax reforms, highlighting the importance of preparing human resources alongside system upgrades. ‘Developing people is as important as developing systems,’ he implored, stressing that human capital remains essential to sustaining digital reforms. Nomoto also praised private sector innovation, referencing a Japanese startup that introduced cloud-based tax reporting solutions for small and medium enterprises (SMEs), which significantly reduced adm
inistrative burdens and increased efficiency.
Meanwhile, innovations discussed at the seminar included clean payment systems where VAT is automatically remitted at the point of sale, a process that could dramatically reduce fraud and enhance revenue assurance. Further, delegates agreed that legal frameworks need to evolve to support such technologies, alongside clear segmentation of taxpayers to tailor compliance strategies effectively.
The seminar also highlighted the role of regional cooperation and knowledge sharing in advancing VAT digitalization. Platforms such as the African Tax Administration Forum’s (ATAF) Digital Reporting Tool and the African Tax Technology Innovation Hub were acknowledged for fostering collaboration, providing scalable digital solutions, and encouraging cost-effective technology adoption across African tax administrations.
In addition to technology, participants stressed the importance of inclusive policy design that ensures digital systems are accessible to SMEs and informal se
ctor operators, who often face barriers to formalisation and tax compliance. The integration of digital tools with regional trade and economic integration goals was also noted as critical for long-term success.
During the seminar, the delegates maintained that digitalization is no longer optional but a vital economic necessity for East Africa’s development. It not only strengthens domestic resource mobilisation but also promotes transparency, good governance, and fiscal independence. Additionally, they reaffirmed that continued investment in digital infrastructure, capacity building, and stakeholder engagement will be essential to sustaining progress. The collective resolve to advance VAT digitalization demonstrates East Africa’s readiness to harness technology for more effective and equitable tax systems that underpin sustainable development.