Taxman targets SMEs in push to raise revenue collection

Money Markets

 

Traders say Parliament has not allocated any funds three years after the SME Act was passed. PHOTO | FILE 

By NEVILLE OTUKI

The Kenya Revenue Authority (KRA) is projecting to more than double the number of taxpayers in the next three years by turning its focus on unregistered businesses.

The authority will target businesses that make between Sh500,000 and Sh5 million per year for increased revenues.

The taxman Monday launched an awareness campaign to sensitise small and medium-sized enterprises (SMEs) to meet their tax obligations. The KRA is seeking to expand the tax base to four million by 2018 from current 1.6 million contributors.

KRA chairman Marsden Madoka said compliance by the group, a majority of which do not pay tax, will raise collections to a minimum of Sh2.5 trillion in the next three years from Sh1.08 trillion in the last fiscal year that ended on June 30.

“This market approach to revenue collection will help eliminate reliance on deficit financing,” said Mr Madoka adding that the taxman would leverage on technology to plug loopholes for evasion.

The country has over the years witnessed an explosion of SMEs in various sectors, creating jobs for thousands of Kenyans.

This growth saw KRA introduce turnover tax in 2007 targeting the sector to boost government revenues and finance the country’s growing budget, whose financing shortfall has recently been widening.

Monday’s campaign launch, however, shows that the SMEs have not been paying taxes.

The turnover tax is applicable at a rate of three per cent of a firm’s total sales.