The wide gap between the actual tax-paying population and the total population has been a worrying trend in most countries over the years. Studies across board indicate that in most countries, especially in Africa, only a small portion of a given country’s population pays taxes.
In 2017, for instance, BusinessTech reported that only 13 percent of the then 56 million population paid income taxes in South Africa.
The BusinessTech, which was making reference to a study conducted by Jayson Coomer, further reported that though the remaining 87 percent was contributing through Value Added Tax (VAT), that portion of the population was not contributing anything more. This trend has not been any different in the Kenyan scenario.
Data released by the Kenya Revenue Authority (KRA) last year indicated that the number of taxpayers who filed the annual income tax returns for the 2017 year of income stood at 3.2 million. Working with a population size of 46 million Kenyans, the number of those who filed tax returns represents a partly 6.9 percent of the population. This trend can only point to one thing; the country’s economy is being driven by a very small portion of the country’s total population.
The recently introduced presumptive tax for small scale and medium-sized enterprises, for instance, is without a doubt an apt platform to give Kenyans outside the tax bracket an opportunity to contribute to the national kitty.
The tax, charged at a moderate rate of 15 percent of the business permit or trade license fees, is a significant strategy to expand the country’s tax base. Despite its implementation on January 1, 2019 eliciting mixed reactions, presumptive tax is one of the easiest tax heads to comply with ever introduced in Kenya.
The target market should fully embrace the tax and take it as opportunity to play the civic duty of tax payment. From an economic perspective, Kenya has a substantial potential to sustain herself as well as emancipate herself from the burden of debts.
The government should keep up the spirit of exploring more tax-base expansion strategies without necessarily imposing additional taxes to the already taxed sectors of the economy.
That way, a substantial size of the population will have an opportunity to contribute to the national kitty.
Daniel Muema, Kitui, via email.