HITCH

Poor records, knowledge gap hurts turnover tax

Small traders are struggling to keep records of their daily sales making it difficult to comply with the turnover tax.

In Summary

•Majority of Micro and Small Enterprises further say they are struggling to understand ToT , even as the taxman moves to fully implement the taxation framework.

•KRA commissioner domestic taxes Elizabeth Meyo says taxpayers need to have goodwill in adhering to the set guidelines in remission of TOT.

George Onyango with fellow jua kali artisans at his Kamukunji workshop, Nairobi, on July 19 /JACK OWUOR
George Onyango with fellow jua kali artisans at his Kamukunji workshop, Nairobi, on July 19 /JACK OWUOR

Small traders are struggling to keep records of their daily sales making it difficult to comply with turnover tax (ToT) remittances, a spot check by the Star has revealed.

This, as the deadline for the first month since the re-introduction of the turnover tax lapsed yesterday.

Majority of Micro and Small Enterprises (MSEs) are also struggling to understand ToT , even as the taxman moves to fully implement the taxation framework.

 

Charged at three per cent of small businesses' monthly gross sales, the tax which targets businesses with an annual turnover of less than Sh5 million is filed and payable on a monthly basis, on or before 20th of the following month.

“Taxpayers need to have goodwill in adhering to the set guidelines in remission of TOT,” commissioner domestic taxes Elizabeth Meyo said yesterday.

Millions of traders, however, could have failed to comply according to the Thursday market survey by the Star, even as KRA insists it has been sensitizing the public.

“I don't know anything about turnover tax,” said one Asenath, a mobile phone dealer in Nairobi, indicating more public sensitization is needed if KRA is to succeed.

Steve Mutwiri, an accountant at a Westlands restaurant said though their business has complied, majority of the small traders are unaware of the tax.

“Majority of these small traders look at the bottom line, they have no records on daily sales making it difficult to comply,” Mutwiri said.

Esther, a retailer who requested to use one name, for fear of being harassed by authorities, said she had not complied since she could not keep track of her daily sales.

 

“If I was selling one line of product maybe, but right now it is difficult because I cant keep track of everything,” she said.

A section of traders has blatantly indicated they will not comply as they already feel overtaxed.

“I am not paying or complying with the turnover tax. We already pay a lot of taxes on doing business including multiple licenses,” said one Margaret Wanjiru, who runs a boutique within the Nairobi-Central Business District.

George Omondi, a mechanic at Roysambu said low business in the wake of a tough economy has made it difficult to keep records of how much he makes a day, hence could not comply.

“This whole thing is complicated, I don't think I will comply,” he told the Star.

James Muraguri, Chief Executive Officer at the Institute of Public Finance Kenya, said while it is encouraging for the government to bring more people into the tax bracket, a flat rate ToT charge on small businesses is not an ideal way.

“Three per cent is really high considering the cost of production by some of these businesses. The tax should apply gradually,” Muraguri said.

In a quick rejoinder, Meyo said concerns that the tax will cripple businesses is “far-fetched”, since only three per cent of the gross turnover is paid to government and the balance of 97 per cent remains with the business owner.