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Why it’s time to rethink Kenya’s turnover tax
According to data from the KRA, between the financial years 2008-09 and 2018-19, the average number of new businesses registering for turnover tax each year stood at 797. Between 2019-20 and 2022-23, this average shot up dramatically to 4,803 businesses annually.
In 2007, Kenya introduced turnover tax in a bid to extend the reach of the Revenue Authority (KRA) to the vast informal sector by providing a simpler tax that was expected to be far less burdensome and more straightforward for micro and small businesses to comply with.
As the name suggests, the tax entails applying a prescribed fixed rate to a company’s gross sales as opposed to the profit and therefore spares businesses the burden of tracking expenses and profit, which would often require a fair amount of accounting expertise to execute.
