Small and medium sized enterprises will not have an opportunity to enjoy full profits from their products since KRA is targeting small and medium enterprises. Well, it’s widely known KRA follows people to the grave. The authority would like to strengthen their tax base by raising the number of active taxpayers to 4 million by 2018 from the current 1.6 million active taxpayers. Ideally, the authority wants to revamp the tax strategy to focus on recruitment of SMEs.
“The authority will engage the SME sector to better understand taxpayers in this category, which will place us in a stronger position to design and implement effective compliance strategies, which is critical in developing sustainable taxation systems,” KRA’s Commissioner General John Njiraini said. The general explained the strategy at the launch of KRA’s Taxpayers month.
At the launch, Njiraini flagged off a roadshow that will engage small and medium entrepreneurs with a view to improving their tax compliance. KRA will offer a broad range of services, including registering SMEs and assisting them file their returns.
Turnover tax was introduced in 2007 in respect of businesses with a turnover of more than 500,000 shillings and less than 5 million shillings per annum. It is applicable at a rate of 3% on gross sales. Njiraini said many small and medium businesses’ do not register voluntarily, while those who do register often fail to keep adequate records, file tax returns, and settle their tax liabilities promptly.
“Hence in the small business context, opportunities for evasion are high and resources are often scarce for field auditing,” said Njiraini.
Kenya Revenue Authority announced plans to work closely with Counties to incorporate Personal Identification Number (PIN) to business licensing at the Counties, expanding the scope of services and activities for which PIN is a requirement and adopting a business classification, structure and tax rates similar to those being applied by the Counties. Currently, there are 8.1 million people in the PIN database. Since KRA is targeting small and medium Enterprises they have decided to adopt the theme of ‘Building trust through taxpayer empowerment and facilitation’.
I don’t how this will be enforced because it’s hard to audit a small enterprise that doesn’t keep proper records. Most entrepreneurs live from hand to mouth making it hard to save and capitalize on stock. I believe KRA will be killing SME’s, but on the brighter side, maybe it will uphold responsible business practice in the country.