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KRA widens tax net to rope in small scale traders

In Summary

• In February President Uhuru Kenyatta ordered the formation of a multi-agency team to come up with an integrated revenue collection system.

•Currently, counties and the national government utilise 11 different revenue systems, which has blamed for the low level of collections

KRA headquarters
KRA headquarters
Image: FILE

To tap into the vast informal sector, KRA plans to use a hybrid of the presumptive and turnover tax- done away with in the 2018/19 financial year.

Turnover tax was applicable to businesses whose turnover did not exceed Sh5 million in a given year of income and was payable after every three months commencing in each calendar year at a tax rate of three per cent of the gross income.

Since January, small business owners have been paying presumptive tax at the rate of 15 per cent of the Single Business Permit. This is applicable to all persons who are issued or liable to be issued with a business permit or trade licence or renewal of license by the county government in a year of income.

“With the re-introduction of turnover tax which now brings kind of a hybrid for the collection of taxes within the informal sector it will make it easier on how their obligations should be structured,” said KRA's deputy commissioner for corporate policy Mauric Oray said.

He added that while it was only now hitting its six-month point since implementation, the performance of presumptive tax had not been as forthcoming.

He said KRA was working to facilitate the informal sector to ensure they understand the tax rules and what their obligations should be under the hybrid tax.

Oray added that the taxman was also working to integrate presumptive tax with the county governments.

KRA is confident a single revenue collection system will be key in meeting the state’s revenue targets which the taxman has been missing over the past few years.

 

“With the increased uptake of an interconnected system, the taxes increase,” KRA deputy commissioner for corporate policy Mauric Oray said.

 

He added that if implemented, a joint tax collection system would enable KRA to widen the tax base by tapping into the vast informal sector and in turn boost revenue collection.

“The key thing we are looking at with this is to recruit as many taxpayers as possible within that bracket which has remained untaxed,” Oray said.

In February President Uhuru Kenyatta ordered the formation of a multi-agency team to come up with an integrated revenue collection system to be used both at the national and county governments.

Currently, counties and the national government utilise 11 different revenue systems, which has blamed for the low level of collections, particularly at the county level.

The integrated tax collection system is aimed at eliminating the duplication of collection efforts and waste of resources.