Why State restored turnover tax for small businesses

For years now, the informal sector has been a key economic hub in many parts of the world. As various economic ?ndings have unanimously put it, the economic contribution of the informal sector in most developing countries’ Gross Domestic Product is substantial. Apart from the substantial economic contribution, 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 currently accounts for over 80 percent 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. In light of this, the government has been keen to put in place a simpler taxation framework to enhance tax compliance in this sector.