The tax conversation in the country continues to heat up as reality of the implementation of sweeping changes under the Finance Act 2018 covering income tax, value added tax, and excise duty hit home.
The amendments to the tax regime, positioned as key to helping Kenya realise its growth agenda, looked at a number of channels to mop up much needed revenue, most of which would be committed to settling development loans advanced to government.
There are a number of amendments that I am in agreement with that would not come out as punitive or adding additional unnecessary burden on what is already a thin taxable base and also a good number that I felt were ill advised. Top on my thumbs-up list is the move to increase the tax base by loading a presumptive tax on the informal sector.
As an initial hook, it will lead to full visibility on future business handled by the MSME’s as they grow.
The cumulative informal sector holds great potential in tax revenue target realisation as the cash flows are currently invisible to the tax man.
Getting a thumbs-down is the increase to 20 per cent in excise duty on fees on money transfer services by banks, agencies and other financial service providers and 12 percent on mobile money. In my opinion, the movement of money as used in the payment for goods, services and remittance should be frictionless.
The closer to zero that fees get, the better for network effects that will drive usage. Tax the outcomes not the factors of production and fulfilment.
Necessity is the mother of invention and with the current state of affairs, the only wiggle room that the majority population has where the tax effect is not embedded, is the fall-back on cash as a medium of exchange and the exploration of new mediums of value storage.
Remember Bangla-Pesa, the community currency used in a low income settlement in Mombasa?
Sprinkle that model with a dash of technology that makes use of the growing agent network as driven by mobile money adoption and distributed banking, throw in offline but real-time trade in zero-rated commodities such as grains that would never have to leave silos, and suddenly you have the makings of a parallel track through which value can flow with much less friction.
The shillings and cents do add up and this may just lay the ground for a new flavour of unique scalable fintech innovations.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
