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Capital Markets

Taxman slaps SMEs with 3 percent turnover tax

 Rose Mwaura
ICPAK chair Rose Mwaura and board member Erastus Kwaka during a budget review press conference in Nairobi on June 14. PHOTO | SALATON NJAU | NMG 

Small and medium enterprises (SMEs) will hand the taxman three percent of the turnover after the Treasury moved to review the 15 percent presumptive tax pegged on county licence fees.

The Finance Bill says the presumptive tax was static and would have seen businesses pay the same tax annually with no timelines as to when counties would raise single business permit fees.

“The Finance Bill proposes to re-introduce turnover tax at the rate of three percent of the gross receipts of the business payable monthly and is to be paid by any resident person whose business turnover does not exceed Sh5 million annually while the presumptive tax will be maintained as a minimum tax,” it said.

Commenting on the development, the Institute of Certified Public Accountants of Kenya (Icpak) chairperson Rose Mwaura said it was unlikely counties had co-operated with the Treasury in collecting the tax.

“It was a failure since no harmonisation of the national and county revenue collection systems was done. How did you expect county treasuries to succeed in collecting revenue on behalf of the national government where they have failed to meet their own revenue collection targets?” She posed.

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Last June the Treasury mandated county governments to collect the tax on its behalf.

Each SME was expected to log onto the Kenya Revenue Authority iTax platform and pay the presumptive tax before counties renewed the 2019 business permits.

EY tax partner Christopher Kirathe said re-introduction of turnover tax was aimed at netting higher revenues since the government now has data on individual earnings by SMEs, which it will use to have more SMEs pay.

“The proposal this year, is because the business license money doesn’t increase year-on-year…but the turnover tax will see more people pay since their records have been already captured,” he said.

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