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Economy

Rotich keeps business permit tax to net cheats

Henry Rotich.
Treasury CS Henry Rotich. FILE PHOTO | NMG 

Small traders will continue paying presumptive tax charged at the rate of 15 percent of annual business permit fee paid to the counties despite proposed re-introduction of a monthly turnover duty to arrest the 1.56 million tax cheats.

The Kenya Revenue Authority (KRA) said on Tuesday the move to retain the presumptive tax is aimed at providing the taxman with additional data on small traders with annual revenue of up to Sh5 million, the majority of whom have not been paying taxes.

The KRA forecasts to net one million small traders who have limited contact with the tax system save for indirect consumption levies.

Maurice Oray, deputy commissioner for corporate policy at the KRA, said the presumptive tax will be key to collecting data on small traders largely operating informally for the purposes of enforcing the proposed three percent-monthly turnover tax.

“The key thing is to recruit as many taxpayers as possible within that bracket which has remained largely untaxed. Probably the driver should not be how much we collected, it should be how many people we get into tax systems,” Mr Oray said on the sidelines of a post-budget forum in Nairobi.

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“Once we get the targeted number of taxpayers, then it will be easier to manage collections from that sector.”

Treasury secretary Henry Rotich has proposed to reintroduce the turnover tax regime through the Finance Bill 2019, six months after replacing it with the presumptive tax.

The continued use presumptive tax is supported by an analysis by the KRA that suggested that some 1.56 million taxpayers with single business permits had not registered under the turnover tax regime.

The taxman said the presumptive tax will be classified as an advance payment and will be deducted by the traders when remitting the turnover duty.

Tax consultants and analysts have viewed the quick switch to the turnover tax as a sign of huge underperformance of the presumptive tax era.

Institute of Certified Public Accountants of Kenya (Icpak) chairperson Rose Mwaura said on June 14 the success of the presumptive tax largely depends on integration of KRA system with that at the counties.

President Uhuru Kenyatta in February directed the Treasury, the KRA, the Commission on Revenue Allocation and the Council of Governors integrate revenue collection.

Mr Oray said integration is among the things “we are implementing and hope that in the coming year, significant revenues will come from that sector.”

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