Economy

Nairobi traders risk penalty for late renewal of licences

CityHall

City Hall. FILE PHOTO | NMG

Summary

  • Traders in Nairobi face penalties for late renewal of business licences as the Kenya Revenue Authority (KRA) eyes improved revenue collection.
  • In a letter to business owners in the city, the taxman warned that those who have not renewed their 2020 business permit would be fined for late payment.
  • The taxman currently collects revenue on behalf of the county government following the signing of a deal in March.

Traders in Nairobi face penalties for late renewal of business licences as the Kenya Revenue Authority (KRA) eyes improved revenue collection.

In a letter to business owners in the city, the taxman warned that those who have not renewed their 2020 business permit would be fined for late payment.

“Kindly note that late payment attracts a penalty of three per cent per month compound from the due date. Therefore, we advocate early payment to avoid any unnecessary inconveniences during our enforcement exercise,” said KRA head of county revenue division John Oriaro in the letter.

The taxman currently collects revenue on behalf of the county government following the signing of a deal in March.

Businesses targeted include supermarkets that pay a one-off trading permit of Sh150,000 as well as semi-permanent informal sector traders who pay Sh2,000 for the trading licence.

Others are agricultural producers, processors, dealers, and exporters with more than 60 workers. They normally pay Sh100,000 in a single business permit within the city.

The Treasury in mid-2018 changed the law to have informal traders recording revenue of below Sh5 million pay the presumptive tax at the rate of 15 per cent of the single business permit fee issued by a county government when renewing their licences.

This was after the previous turnover tax flopped as most traders failed to make revenue disclosures.

The new tax is expected to saddle small traders, who have raised concerns about deteriorating business conditions, with additional operating costs.







It is also expected to provide the KRA, under pressure to collect additional revenue, with additional data on small traders, the majority of whom have not been paying taxes.

Treasury data show that tax collections in the year June rose a measly 0.92 percent to Sh1.453 trillion compared with Sh1.440 trillion a year earlier.

Official revenue statistics published by Treasury secretary Ukur Yatani in July showed that total tax receipts in financial year ended June 2020 rose a measly 0.92 percent to Sh1.453 trillion compared with Sh1.440 trillion a year earlier.

The tax receipts missed the revised collection target by Sh12.74 billion against the set Sh1.47 trillion.

The shortfalls in revenue collection targets widen the country’s budget deficit, which is bridged through increased borrowing to meet the government’s recurrent and development spending on infrastructure projects such as roads, bridges, power plants and transmission lines.