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KRA targets Jua Kali in Sh6.8 trillion tax plan

BUSINESS
By Dominic Omondi | June 25th 2021

Taxman to set up booths in areas such as Gikomba where informal traders are concentrated. [Jenipher Wachie, Standard]

Kenya Revenue Authority (KRA) plans to raise Sh6.8 trillion in the next three years, with the taxman expected to aggressively go after the elusive informal sector.

Besides businesses that are required to pay turnover tax, which includes mostly Jua Kali enterprises, KRA will also go after real estate, non-compliant registered businesses, the super-rich, professionals and the digital economy.

During the launch of its eighth corporate plan yesterday, KRA said it intends to increase the number of taxpayers from the current 6.1 million to 8.1 million by June 2024, with the ubiquitous informal sector at the heart of its strategy to expand the tax base.

National Treasury Cabinet Secretary Ukur Yatani noted the potential of the informal sector, which employs over 80 per cent of Kenya’s workers.

He, however, said that although the sector should pay its share of taxes, it also needs a lot of facilitation.

“To expand the tax base, KRA is expected to do an in-depth analysis on the informal sector to gain a deeper understanding and revenue potential of this sector,” Mr Yatani said.

KRA Commissioner General Githii Mburu said they intend to achieve the three-year goal through tax simplification and employing technology including machine learning, artificial intelligence and blockchain.

“Further, we shall seal revenue leakages through a multi-faceted programme that will entail curbing corruption among our staff and tax evasion,” he said.

As part of the corporate plan, the taxman plans to have presence in areas where the informal enterprises are concentrated.

“What we are calling them is tax booths, in areas such as Gikomba so that we demystify the whole taxation,” said KRA Commissioner of Strategy, Innovation and Risk Management Mohamed Omar. 

He said this is aimed at building trust between informal sector traders and KRA.

Although a big chunk of Kenya’s economy is largely informal, its contribution to the country’s tax pot has been minimal.

It has been difficult to ensure tax compliance among informal businesses, given that some of the enterprises have no permanent locations.

Moreover, their earnings are tiny, which makes enforcement expensive as the taxman could easily find itself spending more for less. KRA insists all it is trying to do is to wean these businesses into taxation. 

Dr Omar said micro, small and medium-sized enterprises (MSMEs) have a dedicated government agency that works with them (MSME Authority) which they intend to work with as well as the traders’ associations.

Counties will also be critical in trying to crack the informal sector. “As you know, we have already started working with Nairobi and we are going to work with others,” said Omar.

Also to be used to net the informal sector is third party data such as from Kenya Power, which the taxman has already used to nab landlords.

The performance of turnover tax, levied at one per cent, has been underwhelming.

The taxman needs Sh117.6 billion to implement the three-year strategy. 

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