EconomyNews

Ruto hits poor making Sh1400 daily with turnover tax

Kenya’s smallest businesses making about Kes1,400 a day or Kes500,000 a year will now be required to pay turnover tax after the Kenya Kwanza government unveiled the regimes’ first money bill that seeks to raise additional Kes300 billion in new taxes.

In the new Finance Bill 2023, Treasury wants to bring down the threshold for turnover tax from Kes1 million to Kes500,000.

The tax will now be levied or the small businesses who make up to Kes15 million a year down from Kes50 million.

This means the bodaboda and mama mbogas in the informal sector who were not under the taxman’s radar will now be required to pay taxes.

Kenya relies heavily on its 3 million formal workforce leaving a huge 15.9 million informal workers outside the tax bracket.

Treasury in the budget policy statement estimates the potential taxable base of the informal sector is Kes2.8 trillion as per the MSME survey.

“Section 12C of the Income Tax Act is amended in subsection (1), by deleting the words “one million shillings but does not exceed or is not expected to exceed fifty million shillings” and substituting therefor “five hundred thousand shillings but does not exceed or is not expected to exceed fifteen million shillings”,” Treasury said in the Finance Bill.

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The new money bill shows a very ambitious programme to raise additional funds targeting both the rich and the poor with an increase of excise tax on mobile money transactions from 12 percent to 15 percent, doubling on value added tax on petroleum products and a four-fold increase in National Hospital Insurance Fund (NHIF) contributions from Kes200 to Kes1,080 a month.

Wealthy Kenyans will specifically be targeted by a raise in income tax bracket to 35 per cent up from 30 percent for Kenyans who earn more than Kes500,000.

The rich will also lose tax exemptions on use of trust funds education, medical treatment or early adulthood housing.

 The new government is also targeting the 14 million Kenyans trading in crypto and NFT (non-fungible tokens) with a new digital asset tax that is to be paid within a day the assets are transferred together with a return of the amount of the payment, the amount of tax deducted, and such other information as the Commissioner may require.

otiato@maudhui.co.ke