This archive report was first published on 15 January 2020.
Kenya Revenue Authority's New Tax on Small Businesses Sparks Resistance ¶
As of January 2020, small businesses in Kenya with annual turnovers below Sh5 million are required to pay a three percent tax on their monthly gross sales. This tax, known as the Turnover Tax (ToT), aims to collect Sh25 billion from small businesses within six months.
The Kenya Revenue Authority (KRA) has introduced a new tax on small businesses in Kenya, sparking resistance from the affected entrepreneurs. The tax, which is three percent of monthly gross sales, is expected to generate Sh25 billion for the government within six months.
Small business owners are concerned that the tax will further reduce their already thin profit margins. They argue that the tax is unfair, especially considering that they are still paying presumptive tax, which takes 15 percent of permit fees charged by counties.
Importers and Small Traders Association Chairman Sammy Karanja expressed his doubts about the tax's success, stating that it was hastily introduced without proper stakeholder engagement. He noted that the Finance Act 2019 was signed in November without involving stakeholders, which led to the failure of the presumptive tax in 2018.
Restaurant owner JM termed the tax as 'dead on arrival,' citing the target audience's inability to afford even one percent of the tax. He also highlighted the additional expenses that small business owners incur, such as administrative costs, accountant fees, and record-keeping.
Salon owner Mary pointed out the thin profit margin she operates on, stating that she sometimes doesn't have any money left to save after incurring multiple expenses. She emphasized the need for small business owners to survive, rather than being taxed further.
As the KRA pushes to expand the tax base and bridge budget deficits, small business owners are urging the authority to reconsider the Turnover Tax. They argue that the tax will only exacerbate the economic challenges they face, rather than providing relief.
