In 2008, Kenya implemented the turnover tax, applicable to any business whose turnover is between $5,000 and $50,000 during the year of operation. The turnover tax was passed in the Finance Act 2006, and the rate charged is 3 per cent. Businesses taxed under this Act are expected to maintain cashbooks, sales receipts and invoices, daily sales summaries, purchase invoices and bank statements. The penalty for failing to file returns by the due date is $20.
Through the Finance Bill 2016, Treasury Secretary Henry Rotich amended a section of the Tax Procedures Act, laying the ground for the Kenya Revenue Authority to collect information in advance from selected taxpayers for purposes of pre-populating the information in Kenya’s iTax system.
KRA can now liaise with telecommunication firms like Safaricom, which operate mobile money platforms and banks, to act as the appointed collection agents. However, Safaricom has rejected KRA’s request to access its customers’ mobile money records.
Kenya has also amended the Rental Income Tax, a turnover tax for landlords whose gross rental income is $10,000 and below, which is charged at 10 per cent.
The new Bill also introduces a lower rental income threshold of $120 per month; the gross rent below this amount is therefore not taxable.
But the plans by Kenya and Uganda to bring small and micro enterprises into the tax net, in the wake of declining collections from the formal sector, face administration challenges.
Last week, the two governments tasked their respective authorities to explore how to tax the informal sector, including small scale traders, farmers, boda boda and public service vehicle operators.
The two countries are looking to the revenue authorities to stem tax evasion in the informal sector, which claims that government budgets are not sensitive to their challenges like access to affordable credit and lack of enabling infrastructure.
Uganda plans to enforce its presumptive tax, which has been at three per cent since 2014, while Kenya plans to apply turnover tax to traders, advance tax to commuter services, and the 10 per cent tax on gross rental income.
Henry Saka, Commissioner for Domestic Taxes at the Uganda Revenue Authority, said they have categorised businesses in order to absorb them into the tax base.
“We have mapped regions and sectors and intend to capture them in the presumptive tax category. We have also asked business registration agencies to have the Tax Identification Number as their topmost requirement. Through this, we intend to absorb more of these businesses into the tax base,” Mr Saka said.
Last year, Uganda revised its presumptive tax regime, simplifying it by categorising businesses and revising the applicable taxes. Businesses that register gross annual turnover between $14,754 and $22,131 per year are charged a presumptive tax of $276.6, or 1.5 per cent of the gross turnover, whichever is lower.
Source: The East African