The Kenya Revenue Authority is finding it hard to collect tax with the change in the employment trends where employees are rendered jobless on automation.
The taxman had estimated its revenue for the current financial year using the number of people employed, but since the 2019/2020 financial year began, a significant number of people have lost jobs.
Companies have been firing employees at a higher rate and recently, some companies have adopted procedures where the firing process has been automated leading to more than 500 employees being rendered jobless in 2019.
Tax revenues derived from employed individuals have down-sided significantly due to the ongoing employment trends, where people are steadily losing jobs rather than securing them.
According to a survey conducted by the Kenya National Bureau of Statistics, the rate at which people are getting employed is very low and those employed are getting slashed off day in day out.
The survey by KNBS showed a weird trend where employment opportunities at the hard-to-tax sectors had increased at a steady rate.
The KNBS data released last year revealed that the number of Kenyans who were on self-employment stood at 15 million people and those who were being paid salaries were only 1.2 million.
KRA said that the less revenue-generating sectors have shown significant improvement while those that are expected to boost revenue are showing serious weaknesses.
“Sectors where we traditionally get a lot of revenues are showing weaknesses while on the vice versa, lesser yielding segments have become dominant,” said KRA’s Deputy Commissioner for Innovation and Risk Management Joseline Ogai said.
The Agricultural sector, for example, had contributed about 34.2 percent to the country’s GDP in 2018 a 6-plus-percent improvement as compared to 2014’s 27.5 percent.
To boost its revenue collection now eyes the Small and Medium Enterprises (SMEs) which are mostly comprised of self-employed individuals.
KRA opines that this would be an important step on ensuring every entity is taxed at a start-up level before it starts facing complications when it expands and becomes a bigger entity.
KRA also pointed out that most non-tax compliant cases have resulted from rapid growing SMEs which were not taxed at the starting level.
“The primary reason of netting small taxpayers would be to enhance compliance while the entities are still young, avoiding future compliance problems upon maturity of entities,” Mr. Ogai added.
The taxman was also forced to increase the tax charged some products and to initiate the taxation of online businesses in an effort to meet the target set by the National Treasury at the beginning of the 2019/2020 fiscal year.