Parliament, KRA urged to explain new turnover tax to SMEs

Parliament and the Kenya Revenue Authority (KRA) have been urged to explain and give guidelines on the implementation of the new turnover tax on small businesses.

According to the Institute of Economic Affairs CEO Kwame Owino, contrary to popular belief, the turnover tax is not an additional levy on small businesses but is only meant to replace the year tax filings with monthly fillings for small businesses.

KRA will start implementing the 3 per cent turnover tax targeting small businesses that make approximately Ksh 400,000 a month or below Ksh 5 million annually.

Many SMEs are sceptical that the new tax is meant to slap them with additional levies.

Owino, however, says the now controversial turn over tax is only meant to aid tax compliance among small and micro-enterprises that are mostly informal.

Owino also says payment of tax on a monthly basis will reduce the burden of compliance among SMEs as the taxman seeks to widen the tax bracket and create efficiency in tax collection.

He blames the current misunderstanding on the implementation and nature of the Turnover Tax to poor communication from KRA and Parliament who crafted the 2019 Financial Bill.

Owino is sceptical if the turnover tax will bear any fruits after the previous three attempts failed with the most recent one being in 2012 where the government sought to introduce 5 per cent turnover tax.

KRA says it will continue to explore more avenues of simplifying tax administration in the informal sector until the sectors full potential is felt in the national revenue coffers.

The turn over tax will be collected on a monthly basis and businesses will be required to fill and pay the taxes on or before 20^th of the following month.