Small and medium enterprises are feeling the pinch of a punitive taxation regime that slaps them with hefty fines even for minor infractions that sometimes are beyond their control. As such, it would be prudent, now that Kenyans are discussing the next Budget cycle, for Treasury policymakers and legislators to re-look the structure that adopts a default adversarial taxation approach towards small firms.
It is not that such businesses should be shielded from tax and penalties for delayed remittances. Rather, the policies, procedures and practices that deliberately set out to cripple small businesses for tax infractions should be reviewed with the aim of increasing compliance rather than intimidating business owners and treating them as suspects.
Kenya's economy is getting back on its feet, thanks to the resilience of small businesses and the determination of their owners. Because of their struggles, they have kept many Kenyans employed and have supported suppliers both directly and indirectly. As such, they should be seen as important partners in reviving economic growth, especially now that big investors are taking a wait-and-see approach due to uncertainties about the August elections. This is the more reason why home-grown businesses should be encouraged to keep going and where possible, they too should be offered tax incentives that will keep them profitable while also giving them headroom for expansion.
Tax authorities and experts should be encouraged to increase their outreach programmes to educate business owners about taxation; how to go about it, how to remain compliant and what to do when they are slapped with hefty penalties. The aim of such outreach should be to repair the relationship between businesses and the taxman on the one hand, and on the other, to make remitting taxes a task that business owners and managers do, not out of fear, but because they are patriotic and take pride in compliance.
The world over, the big stick approach is becoming a thing of the past. Its place has been taken by soft power and diplomacy. There is no reason why KRA and Treasury should not adopt this approach.