Third Party Data Sharing and Tax Compliance for Economic Security in Kenya

Third-party data sharing involves the exchange of data between entities that are not directly involved in a transaction or relationship. In the context of tax compliance, it typically involves the sharing of information by employers, financial institutions, and other entities with tax authorities. This paper reviewed the sharing of taxpayer specific information between Government agencies or Public Sector in Kenya, a concept that has emerged over the last few years with automation of the revenue services such as online registration and filing of tax declarations. This is due to the fact that, despite the recent focus towards strengthening sharing of information and information exchange, the area of impact of an integrated data approach towards revenue mobilization has largely remained un-noticed in public finance literature. This paper provides an overview of information sharing, through third party data sharing to enhance tax compliance. This was achieved through review of practical concepts and issues on third party data sharing, theorizing on impact of information sharing and providing insights for enhanced tax compliance, increased revenue collection and ultimately enhanced revenue mobilization for the country. Relatedly, the paper also discusses how the systems used for automatic third party data sharing combined with data analytics can help improve compliance. The researcher selected participants for the study using purposive sampling based on specific criteria. The responses from the questionnaires were examined and analyzed to identify any connections or relationships among and between categories. The resulting data was then summarized and organized into a coherent whole to describe and interpret the findings related to the principal-agent relationship. One significant finding was that third party data sharing has a significant impact on tax compliance through provision, to tax authorities, of access to more information about taxpayers. Key recommendation is that there is need for enactment and legislation of laws and policies that promote inter-agency sharing of data as well as improvement of the data sharing frameworks in order to enhance tax compliance, and the country’s revenue collection and thereby improve the country’s economic security.