The Kenya Revenue Authority has suspended online VAT registration to combat tax fraud by ghost traders, requiring manual registration to enhance verification and accountability.

The Kenya Revenue Authority (KRA) has announced the suspension of online Value Added Tax (VAT) registration in a bid to curb massive revenue losses caused by fraudulent activities involving ghost traders. This decision forms part of a comprehensive "know-your-customer" campaign aimed at tackling the rampant ‘Missing Trader Scheme’ that has been costing the tax authority an estimated KSh 2.5 billion every month.

Under the new directive, all traders seeking VAT registration will be required to register manually by visiting KRA offices. They must present valid proof of business registration as well as evidence of a physical location from which the business operates. KRA officials have emphasised that this move is necessary to clean up the tax register and improve accountability in the collection of VAT.

The authority revealed that its current VAT register includes nearly 21,000 inactive taxpayer accounts, which have contributed to gaps in the tax system and created opportunities for fraud. By enforcing manual registration and verifying business details in person, KRA aims to remove these inactive accounts and seal loopholes exploited by unscrupulous traders.

The ‘Missing Trader Scheme’ involves rogue traders submitting fictitious invoices to evade paying taxes, thereby defrauding the government of significant revenue. KRA’s efforts to tighten controls and ensure that only legitimate businesses are registered are expected to reduce these losses substantially.

KRA Commissioner General Humphrey Wattanga stated that the agency is committed to enhancing tax compliance and ensuring fairness within Kenya’s tax ecosystem. “We have taken this step to protect the integrity of the tax system and ensure that VAT collection is transparent and accountable. We urge all traders to cooperate by providing the necessary documentation when registering,” he said.

The suspension of online VAT registration marks a significant shift from the convenience of digital processes back to manual verification, reflecting the seriousness of the fraud problem and the authority’s resolve to address it. This measure comes at a time when Kenya’s economy is seeking to strengthen domestic revenue collection amid increasing budgetary pressures.

The authority has assured traders that the manual registration process will be efficient and that efforts are underway to restore online services once the integrity of the VAT register has been secured.

This new policy highlights the ongoing challenges faced by tax authorities worldwide in balancing digital innovation with effective fraud prevention. For Kenyan traders, the new registration requirement means a necessary step towards safeguarding the country’s fiscal health.