– The Finance Act 2019, signed by President Uhuru Kenyatta in Nov 2019 re-introduced the turnover tax for businesses whose annual sales are below KSh 5 million
– With the new tax, KRA seeks to widen its tax bracket in move to seal revenue loopholes
– Majority of small traders have not been paying state levies following National Treasury’s move to scrap the tax in 2018
Small and medium enterprises started paying a 3% sales tax on Wednesday, January 2, following the government’s move to re-introduce the levy in bid to boost revenue collection.
The Finance Act 2019, signed by President Uhuru Kenyatta on Thursday, November 7, 2019, reintroduced the turnover tax for businesses whose annual sales are below KSh 5 million as the Kenya Revenue Authority seeks to meets targets it has missed over the years.
The new tax is expected to further hurt small traders who have in the recent past raised concerns over the worsening economic situations in the country.
Majority of small traders have not been paying state levies following National Treasury’s move to scrap the tax in 2018 due to poor performance owing to failure by small businesses to make revenue disclosures.
The deputy commissioner for corporate policy at KRA Maurice Oray said the presumptive tax which is charged at the rate of 15% of the single business permit fee issued by county governments when renewing their permits will remain alongside the turnover tax.
“The key thing is to recruit as many taxpayers as possible within that bracket, which has remained largely untaxed,” Oray was quoted by Business Daily.
According to the Economic Survey 2019, the informal sector accounted for 90.67% of the total 840,600 jobs created in 2018.
The move by KRA to tax SMEs was also due to the fact corporate businesses had reduced profitability in 2019 that led to job cuts and reduced PAYE – which accounts for nearly half of the taxman’s collections.
Central Bank Governor Patrick Njoroge had on Tuesday,December 31, predicted a tough year for Kenyans in 2020.
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