It's time to harness informal sector’s revenue potential

Tinsmiths at work at their workshop in Kibuye market. [Denish Ochieng, Standard]

For years now, the informal sector has been a key economic hub in many parts of the world. As various findings have put it, the economic contribution of the informal sector in most developing countries’ Gross Domestic Product (GDP) is substantial. Apart from that the informal sector is one of the biggest employers in Kenya. According to an article published by the Institute of Economic Affairs in 2016 titled ‘Economic Burden of the Informal Sector’, the sector accounts for over 80 per cent of employment opportunities in Kenya.

Despite the tremendous potential, the sector has remained the taxman’s hardest nut to crack. Lack of formal structures and a tax framework that suits the sector have been major drawbacks in the taxman’s quest to tap revenue from this sector.