TURNOVER TAX

Patriotism or mama mboga tax, KRA need to restrategize

KRA to expand its tax base by ensuring that all Kenyans pay their fair share of taxes.

In Summary

• Almost 80 per cent of these so-called SMEs don't keep proper records of their daily sales hence a challenge to determine how much one should file as a gross sale at the end of the month.

• Keeping a tab on these traders is also an uphill task as they sprout every day in different parts of the country.

The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

Thursday was the first deadline for filing Turnover Tax (ToT) which has been christened mama mboga tax.

Kenya Revenue Authority is confident ToT will help expand its tax base by ensuring that all Kenyans pay their fair share of taxes.

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.

 
 

While the taxman has thrown his full weight behind the initiative, one thing decision makers sitting at Times Tower need to know is that it is still a tall order to succeed on bringing small traders on board.

One, almost 80 per cent of these so-called SMEs don't keep proper records of their daily sales hence a challenge to determine how much one should file as a gross sale at the end of the month.

Keeping a tab on these traders is also an uphill task as they sprout every day in different parts of the country.

Thousands of businesses are also yet to understand what the tax is, how to calculate their share of tax to be filed and how to file it.

This leaves the question, did KRA conduct enough public sensitization and education?

If KRA is going to depend on 'patriotism' to get returns, then they are in for a rude shock as the majority of Kenyans already feel overtaxed.

Some businesses have blatantly declared they will not comply so KRA should expect resistance.

 
 

The taxman should strategize on bringing the traders on the ToT platform among them being more grassroots campaigns and education, especially in the Jua Kali sector.

It should work closely with county governments who; license and monitor these businesses on a day-to-day basis.

Meanwhile, the government should rethink on how to support small businesses in access to credit and market for their goods and services.

It is worth noting that more than 400,000 small-medium enterprises have been dying annually where 80 per cent close shop before their first birthday, meaning they die in their first year. This calls for proper structures to support SMEs in the country.


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