@ mukiha,as you say KRA never really took the time to think this thing through,to the extent they privately admit that it has not been as successful as they had hoped.
For example,why a lower annual turnover threshold of Kshs. 500k? What is the tax implication for businesses generating less than this? Are they tax exempt?
Why discrimanate on the basis of type of income eg from professionals,landlords etc who are often adept at filing losses! Turnover is not as easy to manipulate as profits/losses!
@Pablo,I feel for you my brother. Just because you chose to 'formalise' your business and went to the expense of registering a limited liability,from a tax perspective,you are likely to be less competitive than your colleagues in the same industry as yourself who operate under sole proprietorships or partnerships! Besides,you'll have to engage the services of a CPA to audit your accounts every year!
What will it take for KRA and by extension the Treasury to think outside the box to revolutionise how to generate and collect taxes from an economy that is largely informal? How do you spread the net to capture the informal sector or encourage them to 'formalise' their businesses much as Pablo has done?
Peter Mwangi (NSE - CEO) gripes that there are 1.3m CDS accounts. Could the fact that there is no Capital Gains Tax be a cause?
In my view,the KRA and again by extension the Treasury and Government,needs to promise that when they capture more people who are currently outside the net,then EVERYBODY will pay less tax as a proportion of their income. Secondly,that tax revenue will be used for the purpose intended and that tax-payers will have a larger direct say in how it will be spent.
Why not exempt EVERYBODY who earns say less than 500k a year from taxes,charge 10% from EVERYBODY earning between 500k and 2.5m a year,and so on to a top rate of say 25%? Apply a similar structure to corporates so as to encourage SME's etc to grow.
Make taxes affordable and penalties punitive - carrot and stick will get the donkeys in us to move in the right direction.
SK'ers,what's your take?