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KRA unveils plan to facilitate informal sector compliance, expand tax base

By Mercy Simiyu October 13th, 2023 2 min read

The Kenyan Revenue Authority (KRA) has made a significant commitment to address challenges faced by the informal sector and integrate these sector players into the tax net.

This announcement came during the 2023 Annual Tax Summit, where KRA Commissioner General, Mr. Humphry Wattanga emphasized the importance of incorporating the informal sector into the tax system.

The informal sector, estimated to employ approximately a lion’s share of Kenya’s total labor force, is considered a significant economic contributor. Mr. Wattanga stressed the need to facilitate and promote the sector’s participation in the formal economy.

One of the key initiatives under KRA’s tax base expansion program is the inclusion of the informal sector into the tax bracket, primarily comprising micro, small, and medium-sized enterprises (MSMEs). This move reflects the recognition of the sector’s economic importance and the necessity to design policies and interventions to ensure their integration into the tax system.

“KRA will collaborate closely with the National Treasury to establish policies that simplify, harmonize, and reduce the tax burden on the focal sector,” said Mr. Wattanga. He also mentioned that KRA would work to educate traders about the benefits of tax compliance.

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The 2023 Annual Tax Summit brought together tax experts and stakeholders who discussed the development of policies that would create a certain, predictable tax system. These policies, the experts believe, will enhance tax compliance, increase government revenue, and promote transparency and accountability. Moreover, they will aim to simplify the tax process for the benefit of all.

The experts noted that well-crafted policies could enable the tax system to withstand shocks, broaden the tax base, and enhance compliance among taxpayers.

Principal Secretary for Finance, Mr. James Mail, who addressed the participants at the event, emphasized the need for a resilient tax system that can adapt to changing economic circumstances. He underscored the importance of well-designed policies in establishing such a system, which would be responsive to both local and international economic changes and enable revenue growth.

“Development of these policies allows the government to offer guidance, create certainty, and establish a coherent tax system,” Mr. Mail said, highlighting the role of such policies in bridging revenue gaps and contributing to a robust domestic resource mobilization agenda.

Commissioner General Mr. Humphrey Watanga expressed his appreciation for the ideas and recommendations shared by experts at the summit, emphasizing KRA’s commitment to incorporating these suggestions into its administration.

“Participants have called for a review and revision of tax laws to promote predictability and accountability in the tax system. KRA will continue working closely with the National Treasury to develop policies aimed at creating a more tax-compliant environment,” Mr. Watanga concluded.

As Kenya looks to bolster its domestic resource mobilization, the commitment of the KRA and its partnership with the National Treasury reflect a significant step toward a more inclusive and effective tax system in the country.