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Kenya Caves, as It Deviates From Taxing the Wealthy More to Taxing Low-income Traders

In an effort to boost regular income, Kenya’s tax office has made a major push to tax small-scale traders and workers in the informal sector, perhaps departing from the government’s original goal to tax “trade” less and “wealth” more.

According to a report seen in the East African, an East African news agency, the Kenya Revenue Authority (KRA) has launched a number of initiatives since the start of the current Financial Year, employed hundreds of additional staff members, and signed agreements aimed at bringing the informal sector within the tax net.

In order to improve voluntary tax compliance among its members, the taxman and the Eastleigh Business District Association, a lobbying organization for merchants in one of Nairobi’s biggest informal business hubs, entered into an agreement this week.

Humphrey Wattanga, commissioner-general of KRA, stated at the annual tax conference last week that the organization is working on measures to take advantage of the “great tax potential” of Kenya’s informal sector, which is thought to employ more than 80% of the country’s workers.

“One of the initiatives under KRA’s tax base expansion program is netting the informal sector into the tax bracket, the majority of whom are the MSMEs,” Mr. Wattanga said.

These comments were made just one month after the KRA deployed 1,400 field officers who, despite the authority’s claim that they will “support taxpayers,” are widely believed to be intended to close tax loopholes and “encourage” compliance, particularly among informal sector businesses that have historically been exempt from paying taxes.

The shift, which will be rebranded to Kenya Revenue Service to promote voluntary compliance, was “anchored on KRA’s adoption of a more facilitative approach with taxpayers,” the taxman said in a statement last month.

In an effort to increase deliberate tax evasion by sector, the authority stated last week that it will “work with National Treasury to establish policies that will simplify, harmonize, and reduce the multiplicity of taxes obligated to the informal sector.”

There are concerns about how well these initiatives would work to increase tax collections and if they are consistent with President William Ruto’s words from the previous year, which suggested a move toward more “wealth” taxes and less “trade” taxes.

“We are over-taxing trade and under-taxing wealth. We will be proposing tax measures that begin to move us in the right direction,” Dr Ruto said during his inaugural address to Parliament last year..

Source: Africa Business Insider



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