The Kenyan Tax Question: Is The Issue A TAX Collection By KRA Or Revenue Spending By The Government?

The narrative that SMEs are not paying taxes is tired, reckless, and irresponsible. The only tax that is difficult to implement for the SME category is PAYE, largely because employees in this category mostly fall below the minimum tax bracket. All the other taxes are paid by SMEs, even Mama Mboga pays.

What we need to appreciate is that the majority of the SMEs are always dying every day and since COVID-19, SMEs are struggling to meet the basic of their needs to remain operational and this is something that the government and parliament have refused to acknowledge.

I believe before we point fingers and accuse so and so of not paying taxes, we need to have a sober conversation on what are the challenges Kenya is facing in regard to tax collection. Is the issue about tax collection or revenue spending by the government?

The Kenyan Context;

Kenya, like many other developing countries, faces numerous challenges in its efforts to generate sufficient revenue to fund its development agenda. However, the key question is whether Kenya’s challenge is a problem of tax collection or revenue spending by the government.

The Kenyan government has a history of implementing various tax policies to increase revenue collection. These policies include the introduction of Value Added Tax (VAT) on previously exempt goods and services, increasing excise duty on cigarettes and alcohol, and expanding the tax base by reducing the minimum threshold for income tax. Despite these measures, the government has not been able to meet its revenue collection targets, which indicates that tax collection is a significant challenge in Kenya.

On the other hand, the Kenyan government has been criticized for its inefficient revenue spending practices. A significant portion of the budget goes towards recurrent expenditures, such as salaries and allowances for public officials, leaving minimal resources for development projects. Additionally, corruption and mismanagement of public funds have been widespread in Kenya, leading to the loss of significant amounts of revenue that could have been used for development. Therefore, revenue spending is also a problem that affects Kenya’s development agenda.

Another factor that impacts Kenya’s revenue collection is the informal economy, which accounts for a significant portion of the country’s economic activity. Many businesses in the informal sector operate outside the tax system, making it challenging for the government to collect taxes from them. While the government has attempted to formalize this sector, it has not been successful due to various challenges, including a lack of resources and inadequate infrastructure.

Finally, Kenya’s tax policies and revenue collection systems may not be aligned with the needs of its citizens. Many Kenyans argue that taxes are too high and that the revenue collected is not spent on projects that benefit the majority of the population. This sentiment has led to widespread tax evasion and avoidance, further reducing the government’s revenue collection capacity.

Related Content: Why We Need A Stable And Predictable Tax Regime In Kenya

The Challenges that Need Proper & Sober Conversations with Parliament;

I believe before we can say that we must increase our taxes and broaden the tax base, we must look at the top issues that create the challenges that we face as a country and how best to address these challenges and align them to the needs of the citizens who are the taxpayers. It is true, no one has a God-given right to tax anyone to death. This means that our needs as Kenyans must be aligned with the tax obligations of the country and this is the sole role of