KRA Implements Exploitative Tax on Small Traders Amid Protests

The Kenya Revenue Authority (KRA) has moved to implement a rather exploitive Turnover Tax (TOT), targeting over 2.5 million small and medium enterprises (SME’s) in the informal sector in its bid to supplement Kenya’s ballooning budget.

KRA has implemented the controversial three percent Turnover Tax (TOT) that took effect on the 1^st of January 2020.

The three percent Turnover Tax (TOT) will affect among others those that run kiosks, small hotels, butcheries, salons, and grocery stores.

The small traders will be expected to pay the KRA 30 shillings for every 1000 shillings made whether the business is making profits or losses averagely.

The 30 shillings for every 1000 shillings made by small traders will be put together and paid wholesomely to KRA at the end of the month.

The three percent Turnover Tax (TOT) will be charged on total sales and will not take into consideration any other costs that come with running the business.

Small businesses will, therefore, be required to keep the necessary records for the determination and ascertainment of the turnover tax to handover to the KRA for the authority to levy.

KRA will, also, in the year 2020, be expecting all new start-ups who seek to register for a business license from the various county governments to pay an extra 15 percent of the permit fees as a presumptive tax.

If an annual business license fee is to cost 10,000 shillings then KRA will expect 1,500 shillings paid to them as what they have ironically termed as the ‘patriotic duty’.

“The tax rate for TOT is three percent on the gross sales and is a final tax. TOT will be filed and paid on a monthly basis,” Elizabeth Meyo KRA’s commissioner for domestic taxes department said.

All businesses are expected to pay the TOT tax on or before the 20th of the following month with the first such tax set to be due on 20^th February 2020.

“KRA, therefore, calls on all sector players to take this patriotic duty for a better Kenya,” Ms. Meyo said not wavering on the decision that comes at a time when businesses across the Country are hard hit.

Exemptions

All youth registered with the Ajira Digital Programme will be exempted from paying taxes from any income earned under the programme for the next three years and are hence also exempted in the TOT tax.

All businesses registered for VAT, those with income above 5 million shillings per annum, employment income, rental income, limited liability companies, management and professional services will also be exempted on the TOT tax.

The Central Organisation of Trade Unions (Cotu) has, however, come out to strongly condemn the move by the government to implement the Turnover Tax (TOT).

“The sales tax will hit hard start-up companies and existing Small and Medium Enterprises,” the Cotu Secretary-General Francis Atwoli spoke on the TOT tax targeting small trades.

“Cotu appeals to the President to scrap the tax immediately. Its implementation is retrogressive,” Atwoli added.

2020 is already starting out as a rough year for SME’s unless President Uhuru Kenyatta intervenes on the exploitive taxes crashing the small traders.

Read Also: Breaking Down The Difference Between Presumptive Tax And Turn Over Tax