Kimani Kuria committee wants eTIMS relief for farmers, businesses

The Chairperson of National Assembly Finance and National Planning Committee Kimani Kuria and a section of members of parliament addressing the press conference at Parliament buildings Nairobi on June 18, 2024.

Photo credit: Dennis Onsongo | Nation Media Group

The Parliamentary Finance Committee wants small businesses with a turnover of less than Sh1 million spared from the requirement of generating a tax invoice through eTIMS for their sales.

Presently, every person who makes a sale must generate an electronic tax invoice, a requirement that most small businesses, including farmers, have struggled to comply with.

The committee recommended the Kenya Revenue Authority (KRA) release fresh regulations to offer legal backing to the exemption.

Finance Committee chairperson Kimani Kuria said most businesses had challenges implementing eTIMS, notably small-scale farmers and micro-enterprises.

“One of the biggest challenges is that the system has locked out these producers from supplying to formal businesses, which is deleterious for the economy at large,” he said in his talking notes on Tuesday.

“To correct this, the committee proposes to exempt subsistence farmers and micro enterprises whose gross turnover is below one million shillings.”

The KRA demanded company expenses be backed by an electronic tax invoice, with big businesses finding it difficult to buy from small businesses that are not eTIMS compliant.

Avocado producers have particularly been hard hit, with exporters being forced to relocate to neighbouring Tanzania, according to Avocado Farmers Association chairperson Munyui Wa Njohi in a past interview.

Tax invoice generated from eTIMS has to have the PIN of the registered user, the time and date of issuance, the serial number of the invoice, the total gross and total tax amounts, and items that small-scale, non-registered farmers and small businesses might have difficulties producing.

Others include the item code of supplies, a brief description of the goods and services, the quantity of supply, the unit of measure, the tax rate charged, the unique register identifier, a quick response code and other requirements as may be specified by the commissioner.

More than 80 percent of Kenyan jobs are generated by the informal sector, which lacks the capacity to generate electronic invoices.

However, the government has also identified the informal sector and agriculture as some of the hard-to-tax sectors, with the State banking on technology such as eTIMS to increase tax compliance in these sectors.

In January, the KRA said it had excluded farmers and small businesses from the requirement to produce electronic invoices for their sales through regulations that capped the threshold for generating an electronic invoice at Sh5 million. Therefore, the Tax Procedures (Electronic Tax Invoice) Regulations 2023 effectively excluded a lot of micro, small and medium enterprises businesses.

The KRA, however, made a U-turn on this proposal and asked every business to generate electronic tax invoice the sales they make, failure to which such an expense will not be allowed when they are filing their income returns at the end of the fiscal year.

The KRA had also told the Business Daily in an earlier interview that it had come up with a new system that would help the taxman monitor the stock changes for small businesses, especially farmers who supply to cooperative societies.

President William Ruto’s government has identified farmers as one of the hard-to-tax sectors, with the government getting little from farming and livestock-rearing activities despite them contributing more than a fifth of the country’s economy.

In its medium-term plan for raising revenue, the National Treasury also plans to introduce a withholding tax of five percent on farm produce sold to cooperative societies and agro-processors, in a bid to expand the tax base.

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