EABC backs new minimum tax on informal businesses

East African private sector has asked Treasury to implement the one per cent minimum tax on informal businesses to increase revenue collection and stimulate economic growth.

East African Business Council Chairman Nicholas Nesbitt said yesterday the government’s increased borrowing from the domestic market and falling revenue collection starve the private sector of credit and worsen the challenge of pending bills experienced by many suppliers to government. 

“The constant conversation is to expand the tax net and the minimum tax is one of the ways to do this,” he said during the launch of a report by the East African Business Council on the state of the East African economy.  

The tax on gross turnover came into effect this month and is payable on three-month installments.  

EABC says the tax could assist the Kenya Revenue Authority bring the informal sector into the tax bracket.

“Think of the number of boda bodas, for example, each of them generating a few hundred shillings a day and at the end of the year they are making money but nobody knows it, and they are not paying taxes,” Nesbitt said.

“Think about a million boda bodas making a few hundred shillings a day and what that means if they pay one per cent of that in terms of tax per day.” 

Nesbitt, however, said scrapping the tax reliefs introduced during the pandemic last year was a misstep on the part of the government.

“As Winston Churchill said, taxing your people out of a recession is trying to lift yourself while standing in a bucket,” he said. “You can’t do it.”