The re-introduction of the turnover tax has been received with apprehension by small business owners who now say they will have to pass on the burden of the tax to consumers.
The Kenya Revenue Authority is however optimistic that the tax along the presumptive tax which was introduced last year will help ease revenue collection from the informal sector, which is the largest employer in the country.
Traders, whom Metropol TV spoke to in Nairobi, fear that the tax will thin their profits even further.
On 1 January 2008, the Kenya Revenue Authority introduced the turnover tax as a means of bringing in the informal sector into the tax net.
The tax was later withdrawn after it failed to gain traction, resulting in the introduction of the presumptive tax in early 2019.
The new tax was imposed at the rate of 15% of a single business permit or license fee.
One year down the line, the government has reintroduced the turnover tax to businesses with an annual turnover of fewer than 5 million shillings that are also paying the presumptive tax.
The tax will be payable monthly at the rate of 3% of a business’ gross turnover.
But traders in Nairobi’s central business district are not enthusiastic about the reintroduction of the tax, saying it will add to the cost of doing business.
Consumers too fear that the re-introduction of the turnover tax will see the cost of living to rise to new levels.
While business owners are skeptical about turnover tax, Kenya Revenue Authority, on the other hand, is optimistic.
In an opinion editorial published in one of the local dailies, Elizabeth Meyo, Commissioner Of Domestic taxes at KRA says, “with presumptive tax, turnover tax, and tax education now in place KRA is upbeat that the taxation landscape of the informal sector is set to change for the good.”
Commissioner Meyo further says, “compliance by sector the means more revenue for the government.”… adding that… “This will go a long way in bridging budget deficits it has been grappling with. In turn, the government will more comfortable provide crucial services like healthcare, education, undertake infrastructural projects without relying on foreign aid.”
The consensus in the streets of Nairobi is the business environment is currently tough. The introduction of turn over tax will increase pressure on an already burdened sector.
However, with KRA out to hit their targets and expand their tax base, it will be a wait and see if they will heed the traders call and put the tax on hold or how traders will balance out the new tax expense and profits.