More pain for hustlers as KRA implements new tax

People surfing in a cybercafe in Nairobi. [Photo, Standard]

Small-scale traders, informally known as hustlers, will be hit this year with more taxes.

The traders with businesses that have an annual turnover of below Sh5 million, will be expected to pay a new presumptive tax computed at the rate of 15 per cent of their annual permit fee.

According to the Kenya Revenue Authority (KRA), the presumptive tax is supposed to bring on board taxpayers who are outside the net.

The tax was supposed to be implemented yesterday. However it is facing challenges after KRA failed to draw up on time the modalities that are supposed to ease its implementation.

SEE ALSO :No joke: comedian Zelensky sets course for Ukraine presidency

An estimated 2.7 million informal traders, including mama mbogas and cyber café operators, are the target of the new tax.

They are collectively supposed to pay at least Sh5 billion this year alone.

A neighbourhood cyber café operator in Nairobi, for instance, is required to pay Sh3,000 as additional tax above the annual Sh20,000 business permit.

Even as the tax was expected to come into force yesterday, disagreements between KRA and county governments on how it should be collected have started to emerge.

On one hand, KRA argues that counties are presumed to be tax agents of the national government and should directly levy the taxes while renewing the permits.

SEE ALSO :Steve Mbogo speaks out on his Range Rover number plate saga

On the other hand, counties say they are not benefiting from the tax and don’t see the reason they should collect it on behalf of KRA.

President Uhuru Kenyatta had hoped to collect as much as Sh5 billion this year from taxing informal businesses.

Short reprieve

Even with the lack of guidelines from KRA, the reprieve for the traders is very short given that the projected revenues to be collected have been budgeted for.

The President’s resolve is the latest attempt to broaden the tax bracket, a year after the State failed implement a similar levy known as a turnover tax.

KRA told The Standard that all eligible taxpayers have a responsibility to ensure any levies due are paid, an indication that it would follow up to ensure compliance.

SEE ALSO :KRA intercepts two stolen luxury cars

“All eligible taxpayers are advised to pay the presumptive tax at the time of paying the business permit fee,” said the authority through its external communications agent.

KRA added that the presumptive tax was intended to bring on board taxpayers who are outside the tax net by making them pay a modest amount, effectively easing the burden on formal sector workers.

County officials said the taxman had not indicated how the tax would be charged alongside business licences.

 County defiance

“That tax is for KRA. We are collecting what is only owned to the county. As long as they have not told us anything about it, we will just collect ours. You should take advantage and pay now,” a county official at the Nairobi licensing office said.

Officials from the Council of Governors (CoG) accused KRA of taking too many liberties by assuming that counties would collect the taxes without being formally approached.

SEE ALSO :KRA intercepts two concealed high-end vehicles at Mombasa Port

“We are not obligated to collect taxes for KRA, instead they should have come to us we discuss what benefit we will get from it,” said an official of the CoG.

In essence, counties would want to have a commission of the revenues collected to incentivise them to collect the presumptive tax while renewing business permits.

KRA responded to questions posed by The Standard, stating that businesses would have to calculate the tax and pay at a later date through banks affiliated with the taxman.

It said that traders should upon paying for their permits, compute 15 per cent of the fee, obtain a receipt from their iTax portal, and then deposit the amount with KRA’s appointed bank.

“The taxpayers will be required to generate a payment registration number on iTax under presumptive tax payment, after which they can pay through M-Pesa or any other partner bank,” KRA said in a notice.

Trying to net the informal traders is among the painful measures that the Government is taking to grow its revenue base. Informal traders are the bulwark of the economy.

Revenue streams

A recent report detailing the counties’ revenue streams puts business permits at the top, with a present annual target of Sh55 billion for 2018.

It is, however, possible for the achievement rate to be just about 60 per cent, translating to Sh33 billion in actual receipts.

At present, taxation on salaries, also known as Pay As You Earn (PAYE), levied on a cascaded scale, is the most important source of revenues for the State.

It was expected that informal traders, including those operating estate kiosks and barber shops, would help bear the burden of running the Government’s operations.

For the latest news in entertainment check out Sde.co.ke and Pulser.co.ke , for everything sports visit Gameyetu.co.ke and ladies we have you covered on Evewoman

KRACoGCouncil of GovernorsPresident Uhuru KenyattaPAYE