Opinion and Analysis
Tax evaders big threat to economy
Posted Sunday, June 17 2012 at 13:45
As I was reading remarks attributed to Walter Reif of Mombasa’s Tembo Entertainment Plaza in one of the local dailies, I was interrupted by a mobile phone text message.
I paused to read. It was from a woman who runs a restaurant in Embakasi, Nairobi. The message was similar and most disturbing!
Walter was quoted recounting why they have had to close the otherwise famous discotheque club.
He cited diminishing business volumes. Reasons? That the mushrooming of nearby unlicensed bars, restaurants and villas had contributed to dwindling fortunes in the entertainment industry since revellers opted to party in the cheaper nightclubs, which are able to sell drinks at lower prices since they paid no taxes.
Walter decried failure by government to crack the whip on unregistered entertainment joints. He regretted that this is the reason many big clubs in Mombasa are now shutting down.
This should worry government. Unregistered clubs and villas won’t pay any tax and attract only low spending tourists. The economy suffers.
The text from the Embakasi hotelier read: “The other day I stopped at a kiosk along Jogoo Road.
I asked for fish and ‘ugali’ which went for Sh300. That is way above what I charge for chips and quarter chicken. Yet these guys do not pay rent like I do.
They do not have half of the trade certificates I have. I wonder if Kenya Revenue Authority, the Catering Levy Trustee and the rest ever bother with them”.
The text continued, “These guys take home close to or more than I on a daily basis. This is a big challenge to us”.
These messages, from different entrepreneurs in different cities, send the same and very clear message to local authorities, taxation and business regulation agencies. Clearly, there is an escalation of inequity and unfair trading practices in the country.
Informal businesses are undermining formal ones.
A while back, I recall a senior lawyer complaining that honest Kenyans who openly declare their business locations and routinely remit tax appeared to receive the most unfair treatment from tax operatives on the beat.
He pointed out that he would expect field tax officers to appreciate and protect compliant practitioners while going an extra mile to flush out the unregistered ones.
It gave one a sense of anger and regret for having registered only to thereafter watch as others continue to practice and compete without registration and get away with it.
Besides the higher business costs, one loses clients to others who vend similar services at lower rates.