This archive report was first published on 8 January 2020.
Published on January 8, 2020, the Kenya Revenue Authority (KRA) is set to reap a Sh17 billion monthly windfall from small businesses following the reintroduction of turnover tax.
The tax, which will be levied at three per cent of a business' gross monthly sales, targets about 2.4 million businesses. According to a survey conducted in 2016, small businesses with gross sales of Sh5 million and below estimated their total turnover at Sh635 billion, with a significant portion made by licensed enterprises.
From these figures, the taxman could easily net Sh228 billion in a year. KRA Commissioner for Domestic Taxes Elizabeth Meyo said the authority will continue exploring ways to simplify tax administration in the informal sector until its full potential is felt in the national revenue coffers.
However, the implementation of the turnover tax has faced challenges since its introduction in 2007. The government has struggled to implement the tax, replacing it with a presumptive tax in the 2018-19 financial year. Tax expert Samuel Mwaura noted that the turnover tax does not take into consideration if a business makes a loss or not, making it difficult for small businesses to maintain a margin of more than three per cent.
