Month: February 2020

Na Rev. Canon Francis Omondi

 

Serikali yetu inaamua kunyonya biashara maskini na kujaribu kuita ni fadhila.

Kuweka Kodi ya Mauzo (TOT) ya 3% kwa biashara ndogo zisizo rasmi ni ukatili, na ni dharau kwa wakenya dhaifu. Ingawaipo kisheria, lakini TOT ni batili. Natamka tamko la kinabii: “Ole wao wanaotunga sheria zisizo za haki, watu wanaopitisha sheria za kukandamiza, Huwanyima maskini haki zao, na kuwaibia maskini wa watu wangu maslahi yao…” (Isaya 10:1)

Biashara ndogondogo, vioski, maduka rejareja, saluni au wachuuzi wadogowadogo, tabaka la chini kabisa la sekta isiyo rasmi, sasa wanatakiwa kulipa TOT. Kodi inayotozwa kwa mkazi yeyote ambaye mauzo yake hayazidi au hayatarajii kuzidi Ksh. 5,000,000 kwa mwaka wowote wa mapato. Italipwa kuanzia 1 Januari 2020. Wanatoza kiwango hiki cha ushuru kwenye mauzo ya jumla / faida na ni ushuru wa mwisho. Bi Elizabeth Meyo, Kamishna wa Ushuru wa ndani katika Mamlaka ya Mapato ya Kenya (KRA), anasema kwamba “kuanzia Januari 2020, ikiwa mtu atafanya kazi saluni, buchani, au duka la rejareja, atahitajika kutangaza mauzo yake mtandaoni na kulipa ushuru tarehe 20 ya kila mwezi. “Na kwa mtu kupata leseni ya biashara kutoka serikali ya kaunti yake, atalazimika kulipa nyongeza ya asilimia 15 ya kibali cha KRA kama ushuru wa awali. Kutokana na vigezo hivi vipya, Bi Meyo anaongeza kusema, “wamiliki wa biashara watakuwa wametimiza wajibu wao wa kizalendo kwa Kenya bora”.

Tafiti kadhaa za uchumi zinasifia mchango mkubwa wa sekta isiyo rasmi katika nchi nyingi zinazoendelea katika mapato ya nchi zao. Sekta isiyo rasmi ni moja ya waajiri wakubwa nchini Kenya, na inatoa zaidi ya asilimia 80 ya fursa za ajira. Ni aibu kwamba macho ya watawala yamegeukia kwenye sekta hii tu kwa sababu ya pesa zao, na kuziba pengo linalotokana na kupungua kwa mapato kutoka kwa sekta rasmi. Kulingana na Zachary Mwangi, matumizi ya kila mwezi  ya mishahara na ujira kwa Biashara ndogondogo na za Kati (MSEMs) ilikuwa Ksh bilioni 9.0 ambayo ni sawa na asilimia 25.0 ya jumla ya mapato. Idadi ya watu wanaojihusisha na biashara ndogondogo na za kati (MSEM) ilikuwa takriban milioni 14.9 na biashara ambazo hazisajiliwa zinachangia 57.8%. Wafanyikazi wanaolipwa walikuwa milioni 4.0.

Mfumo wa masoko wa kikoloni bado unaendelea kutawala uchumi wetu, ambao unatufanya tuione sekta isiyo rasmi kuwa duni kuliko ile iliyo rasmi. Bado tunaiona ‘ya chini’, pembezoni au pembeni na isiyo na uhusiano wowote na uchumi rasmi wa maendeleo ya kisasa ya viwanda. Kwa hivyo tumepuuza sekta hii. Wachumi wengine wameielezea kamadimbwi la ajira lenye wafanyakazi waliokosa sifa za kuingia katika sekta rasmi. Wengine kama Jeffery Sachs wamekwenda mbali zaidi na kutamka kuwa sekta isiyo rasmi itapotea kabisa Kenya itakapofikia viwango vya juu vya ukuaji wa uchumi na viwanda.

Wengine waliona nguvu ya biashara ndogondogo za sekta isiyo rasmi. Mchumi De Soto (1989) aliona biashara hizi zisizo rasmi kama ishara ya ari ya ujasiriamali, na nguvu halisi katika soko. Na inaweza kunyanyua viwanda, kwa sababu ya ustahimilivu wao na uwezo wa kuhimili mitikisiko ya masoko kwa muda mrefu kama Shem Watako alivyoona katika masomo yake ya udhamivu ya biashara ndogo ndogo huko Kariobangi. (2016: 204)

Ujasiri huu wa sekta isiyo rasmi ndio umewavutia watoza kodi. Lakini changamoto ni jinsi watakavyotekeleza hii TOT. Bi Meyo anaainisha ugumu huu, wakati akijibu ni kwanini Kenya iliamua kuweka TOT kwenye biashara ndogondogo, “kukosekana kwa muundo rasmi na mfumo wa ushuru unaolingana na sekta hiyo kumekuwa kikwazo kikubwa kwa tamaa ya ‘watoza ushuru’ kuchota mapato kutoka kwa sekta hii.”

Hoja ya kimaadili ya wale wanaowaita wafanyabiashara wadogowadogo kulipa ushuru kama inavyodaiwa, haiwezekani, kwa sababu haijibu swali la pili. Je! Ni sawa kuweka hivi kwa biashara masikini zaidi za Kenya?

Je ni maadili kuwapuuza masikini , wakati mfumo mpya wa kodi utawanyonya?

Hebu tuangalie mfano wa biashara inayoendeshwa na Achieng ‘, ” Nyamulu Beauty Salon”, huko Kariobangi ili kuonyesha ukweli huu. Pamoja na mapato yake ya Ksh. 100,000 kwa Januari 2020, bado TOT inamhusu.

Kodi ya mauzo (TOT) ni kama kodi ya ongezeko la thamani (VAT), tofauti yake ni kwamba inatoswa papo hapo kwa bidhaa za mtaji, kama Kimaru na Jagongo wanavyosema. Ni kwa msingi wa ‘ad adorem’ (kulingana na thamani ya bidhaa husika, badala ya kuwa kiwango sawa), inayotumika katika mchakato au ngazi ya uzalishaji. TOT inafanya maskini kulipa kodi nyingine isiyo ya moja kwa moja, wakati wale wenye mtaji wa zaidi ya milioni 5 watalipa kodi ya moja kwa moja ambayo ni mpango bora wa ushuru kwa biashara zao.

MFANO WA NYAMULU BEAUTY SALON, YA KARIOBANGI.

 

KIPENGERE	MAPATO/GHARAMA	USHURU & KODI
Mapato kwa wateja 100 @ 1000	100,000
Gharama pungufu
Umeme	(5,000)	VAT +Kodi	(901)
Malighafi (Mafuta, nywele, n.k.)	(30,000)	VAT @16%	(4,800)
Kodi ya chumba	(12,000)	Kodi ya kodi ya pango@10% Incl	(1,091)
Wafanyakazi 2@500 a day	(30,000)
Ushuru wa Mshwari	(5,850)
Leseni ya kaunti	(1,250)	Leseni ya kaunti	(1,250)
Faida ya uendeshaji wa biashara	15,900	Jumla ya kodi & ushuru	(8,042)

Matarajio

VAT huoangwa kwa kila bidhaa na huduma

MFANO WA 1 -TOT
Faida ya Uendeshaji Biashara	15,900
Kodi ya mauzo pungufu	(3,000)	Jumla ya kodi & Ushuru
Faida halisi	12,900		11.04%

 

MFANO WA 2- Kodi ya mapato binafsi
Faida ya biashara	15,900
PIT –Baada ya msaada	(362)	Jumla ya kodi  & Ushuru	(8,404)
Net Profit	15,538	Asilimia ya kodi	8.4%

 

MFANO WA 3 Kodi ya mapato binafsi na VAT ikihusishwa
Faida ya uendeshaji wa biashara	15,900
VAT ya mtaji ikiondolewa
Umeme	664
Malighafi	4,800
Faida halisi/mapato ya kutozwa kodi	21,364
PIT -Baada ya msaada	(1,182)	Jumla ya kodi & Ushuru	(3,760)
Faida halisi	20,182	Asilimia ya kodi	3.76%

Mfano wa 3 unatia moyo wafanyabiashara wadogo kujisajili kwa VAT ambayo inakwenda hadi kwa wateja; athari ni kuongezeka kwa uwazi na kuongezeka kwa makusanyo ya VAT kwa KRA.

 

 

	TOT	PIT	PIT +VAT Reg
Faida	12,900	15,538	20,182
Kodi	11,042	8,404	3,760
Asilimia ya kodi %	11.04%	8.4%	3.76%

 

 

Mpango mbadala wa ushuru badala ya TOT ungekuwa na matokeo tofauti. Ikiwa mifano ya apo juu imeelezea biashara yake, basi kwa mfano wa kwanza ambapo angelipa TOT, faida yake ingekuwa Kshs. 12,900. Katika mfano wa pili ambapo analipa kodi ya mapato binafsi, faida yake ingekuwa Ksh. 15,538. Na kama angesajiliwa VAT na analipa pia PIT, angefanya faida ya Ksh. 20,182.

Kwa hiyo mpango wa ushuru wa mmoja mmoja ungefaa zaidi kwa makundi ya biashara ya kipato cha chini kuliko TOT.Utaona pia kuwa biashara yake imechangia kwa namna nyingine mapato ya serikali ya Ksh. 8, 042. Halafu kamaikihusisha TOT ya Ksh. 3000, angechangia Kshs. 11,042 kwa mapato ya serikali.

 

Je ni sawa kwamba mamlaka ya kodi inamong’onyoa mtaji wa masikini?

Mtaji wa kianzio kwa biashara ndogo ndogo hutokana na rasilimali za familia, kulingana na McCormick et al. (1997) hii huathiri ukubwa wa biashara zao, idadi ya wafanyakazi ambao wanaajiri, na kiwango cha faida wanayopata. Kwa hivyo, wanakuwa na kiasi kidogo kinachopatikana kuwekeza tena. Mwangi (KNBS 2016) anasema kuwa biashara ndogo ndogo zilizosajiliwa ziliripoti kutumia asilimia 45.3 ya mapato yao yote kwa uwekezaji, iwe kama kujazia mtaji au kuwekeza katika biashara mpya na uwekezaji katika kilimo, wakati matumizi kwa ajili ya kaya na familia yanahitaji asilimia 44.5. Mnamo mwaka wa 2016, Mwangi anabainisha, biashara ndogo na za kati zilitumia kwa kiasi kikubwa sehemu ya mapato yao kwenye uwekezaji kwa asilimia 63.4 na 69.7.

Mmomonyoko wa mtaji kwa biashara ndogo kwa njia hii, kutachelewesha sana jitihada zao za kuutoroka umasikini. Badala yake, kuwaruhusu kukuza mtaji kungesaidia kukanusha mtazamo unaoshikiliwa na wengi ikiwa ni pamoja na ILO (2002) inayounganisha sekta ndogo ya biashara na umasikini, kwa sababu wanapata kidogo kwa wastani kuliko wale walio kwenye kazi rasmi. Kwa maana, kama Watako (2016) alivyogundua, “idadi kubwa ya wajasiriamali kwenye sekta isiyo rasmi wanapata zaidi, kwa wastani, kuliko wafanyikazi wasio na ujuzi katika sekta rasmi”.

Sio uungwana kuwanyima masikini nafasi ya ushindani sawa katika soko kwa kuwaongezea kodi kwenye biashara zao.

Serikali zimetumia ushuru kunyamazisha sehemu ya uchumi. Cheeseman, N., & Griffiths, R. (2005) anasema kwamba ushuru wa mauzo unaweza pia kuwa adhabu kama umeundwa kukwamisha kununua bidhaa fulani. Wanasema sheria za mazingira wakati mwingine huhimiza suala hili, kuwanatoza watu zaidi juu ya ununuzi wa vitu vinavyoharibu mazingira.

Licha ya asili ya ugumu kwa sekta hii, mamlaka kuwalenga Tabata la chini ambalo linahenya na mzigo wa madeni ni kukosa ubunifu na ni uovu. Tunaona TOT kama jaribio la kuyakata kabisa kutoka kwenye soko. Hizi biashara ndogo ndogo nchini Kenya, kulingana na uchunguzi wa serikali wa 2010, ziliajiri watu wapatao milioni 2.4, sawa na 17% ya wafanyikazi nchini Kenya mnamo 2009. Wanajihusisha kama ifuatavyo: karibu na 2 /3 Theluthi mbili – 64.1% ya biashara zote zilikuwa kwenye sekta ya uchuuzi. Biashara za rejareja zilichangia 62% ya biashara zote nchini Kenya. Viwanda hufanya 13% wakati huduma 15% (Watako 2016: 207).

Sio uungwana kwa serikali kuwatwisha mizigo bali kugawanya maslahi kwa usawa kwa masikini.

Katika demokrasia huria, anasema Prof Nicholas Wolterstorff wa Shule ya Biblia ya Yale, serikali haipaswi kuwa na  upendeleo wakati wa kugawa wajibu na maslahi kwa raia wake. Serikali yetu haipo katika maisha ya raia hawa masikini, kwa sababu ya vipaumbele vya maendeleo vilivyowekwa. Wanaishi katika makazi duni, na watoto wao wanaohudhuria shule zilizosongamana, wanakosa huduma za afya, watumiaji wakuu wa usafirishaji wa umma wowote unaobakibarabarani na wanaohitaji chakula cha kutosha. Lakini sasa wanafurahia kuwatoza ushuru wafanyabiashara hawa wa tabaka la chini kabisa la taifa letu, wakiwa ama katika makazi duni ya mjiji na miji yetu au maeneo ya vijijini. Kupitia biashara zao wameboresha mengi sana. Watako (2016: 209) anaonyesha jinsi wajasiriamali wadogo wadogo huko Kariobangi alivyochochea ustawi wa maeneo, hasa mahitaji ya msingi: shughuli za biashara; upatikanaji wa huduma ya afya; upatikanaji wa elimu; upatikanaji wa makazi; upatikanaji wa maji na usafi wa mazingira; njia bora za usafirishaji; kuongezeka kwa chakula na mapato.

Tunaweza kutumia ushuru kwa uzuri, hata kwa kuondoa uonevu katika jamii na kutoa huduma sawa kwa raia wote. Eric Nelson profesa wa Harvard, anafafanua wazo hili kwamba serikali inapaswa kudhibiti kikamilifu ugawanywaji wa mali kwa sababu ni jukumu la serikali kujihusisha na ugawaji wa mali kupitia ushuru hivyo kuhakikisha ustawi wa watu masikini, na huo ndo mwanzo wa ustawi katika nchi nyingi za Ulaya.

Kulazimisha ushuru bila kujali hali ya biashara ya walipaji inakumbusha kicha ya pango na kichwa ya Kikoloni ya 1920s. Halafu, viongozi wenyeji na mwakilishi walitetea watu wao dhidi ya unyonyaji wa wakoloni. Katika kujibu mahitaji ya koda, viongozi wa Luo huko Nyanza walishauriana na wakaita mkutano mkuu huko Lundha, Gem mnamo tarehe 23 Desemba 1921. Karibu watu 9000 walihudhuria kutoka sehemu zote za Nyanza kujadili shida hiyo kwa mara ya kwanza. Wakajadili kodi ya Pango. Wakati wa mkutano Mkuu Ogada Odera wa Gem huko Nyanza ya kati alilia: “Kuhusu kodi zetu, zilikuwa sh. 3. Bwana John Ainsworth (Kamishna wa Mkoa wa Nyanza kule Kisumu kutoka 1906) alituambia kwamba kiasi hicho kitaongezeka hadi sh. 5, tulikubali. Serikali sasa imeongezeka hadi sh. 8. Ni nzito sana. Mbali na hilo, hatutaki wanawake wetu walipe ushuru. ”

Chifu Ogada, alitoa maoni yake: “Kuhusu neno koloni, serikali ilikuja hapa na kutukuta tukiwa na kazi na sasa inatuita ‘wasumbni’ (watumwa wao)”. Alikuwa akielezea kuwapa watu wake ufahamu kuhusu mabadiliko.

Watoa maoni wengi juu ya TOT wameunga mkono msimamo wa serikali na unyonyaji wa biashara duni kwa kuiita ni haki, uzalendo, rahisi kutekeleza na kukamilisha. Nadhani wako nje ya uhalisia.

Kuna mtazamo wa jumla wa mapato makubwa katika sekta isiyo rasmi. “Lakini serikali haikuwa ikipata faida yoyote ya kodi kutoka kwa biashara hizi,” Kamotho Waiganjo anaandika, “… wale wanaofanya kazi katika tasnia rasmi, na walio kwenye uangalizi wa mamlaka ya kodi, … wanalipa hadi asilimia 30 ya faida ya kila mwaka kama kodi, … biashara katika sekta isiyo rasmi inamaanisha kwamba wafanyabiashara wengi katika tasnia hii ghali hukwepa mitego ya mamlaka ya kodi. Haitakuwa hivyo tena.”

Fikra hii, kwamba masikini katika sekta hii huchuma kiasi kikubwa cha mapato lakini hawachangii kwenye kapu la ushuru, ni makosa. TOT ni ushuru usio wa moja kwa moja wa biashara na sio ushuru unaotokana na mapato ya faida ya biashara. Biashara za sekta isiyo rasmi tayari hulipa kodi zingine zisizo za moja kwa moja, kwenye mafuta, umeme, VAT kwenye bidhaa zao na kodi ya pango inayokusanywa kutoka kwa kodi zao. Ikiwa watalazimika kulipa kodi ya nyongeza, je! Sivyo pia wanapaswa kulipa kodi kutoka kwa mapato yao nje ya biashara, ambayo huja chini ya ushuru wa mapato binafsi na sio 30% ambayo makampuni wanalipa? Je! Si kwamba gharama za bidhaa, gharama za biashara, na misaada yao mingine pia itahusika?

Wengine wanasema kuwa gharama ya kukidhi vigezo ni ndogo. Inahitaji nyaraka chache za walipa kodi katika eneo hili.Kinachohitajika ni rekodi ya mauzo yao tu. Wale wanaolipa ushuru wa mauzo hawatahitaji kuwa na wasiwasi juu ya kufuatilia matumizi yao, ushuru wao uko kwenye mauzo. Inamaanisha kwamba nyaraka muhimu mkubwa kwa wafanyabiashara ni kuonyesha mauzo yao tu.

Sasa hii ni kuweka kikwazo katika njia ya kipofu. Kuweka rekodi sahihi za biashara kuna faida nyingi kwa wamiliki wa biashara sio tu kwa TOT. Rekodi sahihi zinaweza kuwaongoza wamiliki wa biashara kutathmini utendaji wao wa biashara, kufuatilia gharama za ununuzi na mauzo, wadai na wadaiwa na kusaidia katika kufanya maamuzi muhimu ya biashara. Maskini anapaswa kushauriwa.

Matokeo ya unyonyaji biashara ndogondogo yatakuwa janga kwa sababu ya umuhimu wa sekta hii katika uchumi. Inaweza kuamsha miitikio mikubwa miwili kutoka kwa masikini:

Kwanza, ikiwa biashara ndogo ndogo zikinusa unyonyaji, zinaweza kutoweka kwa na kupotea. Biashara zinahisi kiurahisiunyonyaji wa mamlaka na zinaweza kutulia, kurekebisha shughuli zao hadi hali itapobadilika. Uharibifu baada ya kutoweka kwao unaweza kuwa mkubwa. Bwana Francis Atwoli Katibu Mkuu wa Jumuiya kuu ya Vyama vya Wafanyabiashara (COTU) kufuatia tathmini yake alionya kwamba kuweka ushuru zaidi kwa wafanyabiashara wadogo na wa kati sio tu kutaharibu sekta inayokua kwa kasi ya uchumi lakini pia itawapa Wakenya wengi kukosa kazi.

Uchunguzi uliofanywa na Ofisi ya Takwimu ya Taifa ya Kenya (KNBS) ya 2016 unaonyesha kuwa takriban biashara 400,000 ndogondogo na za kati hazisherehekei siku yao ya pili ya kuzaliwa. Wachache hufikia siku yao ya kuzaliwa ya tano- inaonyesha wasiwasi wa uendelevu wa sekta hii muhimu. Wanaposhinikizwa, hutoweka hewani.

Pili, ikiwa wamiliki masikini wa biashara watatafsiri kodi hii kama ukandamizaji, wataasi. Utekelezaji wa TOT utaamshamaumivu ya enzi za ukoloni. Kodi ya pango na kichwa ilikuwa mzigo mzito kwa watu wa Kenya katika miaka ya 1920. B A Ogot (2009: 772) anaona kuwa ilifanya vibaya zaidi na njia ya ukusanyaji ambayo ilikuwa ya kikatili na ya hovyo. Huko Nyanza, walikusanya Ushuru wa pango kwa vibanda vyote huko Kraal, pamoja na ‘duol’ na ‘abila’ (Mazizi ya mifugo). Wakati watu wengi walikataa kulipa kodi hizi, wakuu wa wakoloni wakiwemo wakuu na makarani wa kodi walitumia njia za kikatili za ukusanyaji, wakawaamuru wakuu wa polisi na machifu kuvamia vijiji, kuchoma nyumba, kuchukua mali au vitu vya chakula kama vile nafaka, ndizi na mihogo.

Kwakuwa TOT itakula maisha ya wamiliki hawa wa biashara, wataasi. Lakini watakomesha uasi wao, kwa kukosa uwezo uongozi kama vikundi vya kupinga kodi ya kichwa kule Uingereza mwaka 1990. Kuanzisha “kodi ya kichwa” ni suala liliomlazimisha Bi Margaret Thatcher kuachia ofisi mnamo Novemba 1990.

Jarida la kijani la 1986, Kulipa Serikali za Mitaa, ilipendekeza kodi ya kichwa, ambayo ilitoza kiwango fulani cha kodi kwa kila mtu mzima kwa huduma zinazotolewa katika jamii yao, ndio maana ya neno ‘kodi ya kichwa’. Ilikuwa mabadiliko kutoka kwa malipo kulingana na thamani ya nyumba ya mtu hadi mkazi mmoja mmoja. Kodi hiyo, ilipingwa kuwa haikuwa sawa, na mzigo mzito kwa wale wasio na uwezo. Kilichofuata ni maandamano na ghasia zilizosababisha kukomesha kodi kufuatia mabadiliko ya serikali ya kihafidhina Novemba 1990.

Nini KRA ifanye kwa biashara masikini?

Serikali na KRA kama chombo kinachotekeleza wanaweza kutenda wema kwa kuzuia kuumiza biashara za watu masikini. Wanaweza kuifanya iwe sera ya kipaumbele kurekebisha sekta isiyo rasmi badala ya kuifuta kupitia sera kali za kodi. Kodiya mapato kama ilivyotungwa ni hiari, ambayo biashara ndogo zenye sifa zinaweza kuamua kujisajili kwa mfumo wa kawaida wa kodi. Hatua hii ingewaruhusu kutambuliwa kama biashara zingine. Rekodi makini, kuhusishwa sheria na mchakato wa kupunguza ambao unahitajika katika kuthibitisha matumizi. Tunapaswa kufanya bidii katika kusaidia biashara za watu masikini, kutunza rekodi sahihi za biashara na kuwawezesha kuingia katika mpango mbadala wa kodi.

Serikali hii inapaswa kutii maneno ya Hubert Humphrey, Makamu wa Rais wa zamani wa Marekani, wakati wa kuwekwa wakfu kwa Jengo la Hubert Humphrey mnamo Novemba 1, 1977, alisema: “Mtihani wa maadili ya serikali ni jinsi serikali hiyo inavyowatenda wale ambao wanaanza maisha, watoto; wale ambao wako katika mapambazuko ya maisha, wazee; wale ambao wako kwenye vivuli vya uzima, wagonjwa, wahitaji na wenye ulemavu. ”

The tinders are there waiting for something to ignite them. If the poor interprete these as days of extortion, we may as well have ushered in days of revolt.

Kuni ziko tayari zikisubiri kitu cha kuziwasha. Ikiwa maskini wanatafsiri kama hizi siku za unyonyaji, tunaweza kutumbukia sote kwenye siku za machafuko.

 

Canon Francis Omondi ni kuhani wa Dayosisi ya kanisa kuu la Watakatifu Wote, katika Kanisa La Anglikana La Kenya. Yeye pia ni mhadhiri wa msaidizi katika Chuo Kikuu cha St Paul cha Limuru. Maoni yaliyoonyeshwa hapa ni yake mwenyewe.

 

 

 

 

 

By Rev. Canon Francis Omondi

 Our government is choosing to extort the poorest businesses and trying to make a virtue of it.

Imposing the 3% Turnover Tax (TOT) on informal micro and small businesses is monstrous, and a disdain to the weaker Kenyans. Though legal, TOT is IMMORAL. I echo the prophetic declaration: “Woe to those who make unjust laws, to those who issue oppressive decrees, to deprive the poor of their right and withhold justice…” (Isaiah 10:1 NIV)

The micro and small-scale businesses, operating kiosks, grocery stores, salons or any small market traders, at the bottom tier of the informal sector, are now to pay TOT. A tax demanded of any resident person whose turnover from business does not exceed or is not expected to exceed Kshs. 5,000,000 during any year of income. It will be payable from 1st January 2020. They make this tax rate on the gross sales/turnover and is a final tax. Mrs. Elizabeth Meyo, the Commissioner of Domestic Taxes at the Kenya Revenue Authority (KRA), states that “from January 2020, if one operates salon, butchery, or grocery store, you will be required to declare your sales online and pay the taxes on the 20th of each month.[1]” And for one to get a business licence from their county government, they will have to pay an extra 15 percent of the permit fees to KRA as presumptive tax. In complying to these new demands, Mrs. Meyo further declaims, “the business owners will have fulfilled their patriotic duty for a better Kenya”.

Various economic findings acknowledged the substantial contribution of the informal sector in most developing countries to their Gross Domestic Product. The informal sector is one of the biggest employers in Kenya, and accounts for over 80 percent of employment opportunities. It is a shame that attention is turning to this sector only for their moolah, and to bridge the gap resulting from dwindling revenue from the formal sector. According to Zachary Mwangi[2], the monthly expenditure on salaries and wages for unlicensed Micro Small Medium Enterprises (MSEMs) was Ksh 9.0 billion which translates to 25.0 percent of total outlays a piece. The number of persons engaged in MSEM was approximately 14.9 million with unlicensed enterprises contributing 57.8%. Paid employees were 4.0 million.

The colonial market design continues to define the contours of our economy, which conditions us to think of the informal sector to be inferior to the formal. We still perceive it as ‘traditional’, marginal or peripheral, having no link with the formal economy for modern industrial development. We have therefore neglected this sector. Some economists have argued, of  it as a dead-end for a pool of labour considered comprising workers who could not gain entry into the preferred formal sector. Others like Jeffery Sachs have even gone to pronounce the informal sector’s obituary stating that it would cease to exist once Kenya achieves sufficient levels of economic growth and industrialization.

Others saw the potential of the informal sector’s small businesses. Economist De Soto (1989)[3] viewed these informal businesses as a sign of entrepreneurial dynamism, with real force in the market. And could be useful in industrial take-off, due to their resilience to dig in and ability to withstand market shocks over a long haul as Shem Watako observed in his doctoral studies of micro and small businesses in Kariobangi. (2016:204)[4]

This hubris in the informal sector has got the taxman’s attention. But the challenge is in how they will implement the TOT. Mrs Meyo identifies this difficulty, while responding to why Kenya resorted to TOT for small businesses, in the “lack of formal structures and a tax framework that suits the sector have been major drawbacks in the taxman’s quest to tap revenue from this sector.”

The ethical reasoning of those calling for the micro and small-scale businesses pay taxes as demanded is implausible, because it does not raise the second order question. Is it moral to make these demands on the poorest of Kenyan businesses?

 

Is it moral to treat the poor with partiality, when the new tax regime would disenfranchise them?

A turnover tax is like a sales tax or a value added tax (VAT), with the difference that it taxes intermediate and capital goods, as Kimaru and Jagongo[5] argue. It is on an ad valorem basis (based on the value of the good in question, rather than being flat taxes), applicable to a production process or stage. TOT makes the poor to pay another indirect tax, while those above the cut off of 5 million would pay direct tax a better tax plan for their businesses.

Let us consider a hypothetical case of a business run by Achieng’, “Nyamulu Beauty  Salon”, in Kariobangi to illustrate this point. With her revenue turnover of Ksh. 100,000 for January 2020, she would enlist for TOT.

NYAMULU BEAUTY SALON, KARIOBANGI TRADER- SCENARIO

ITEM	REVENUE/COST	GOVT TAXES &LEVIES
Revenue 100 clients @ 1000	100,000
Less Cost
Electricity	(5,000)	VAT +Levies	(901)
supplies (Oils, hair pieces, etc.)	(30,000)	VAT @16%	(4,800)
Rent for Stall	(12,000)	Rent Tax @10% Incl	(1,091)
Casual Workers 2@500 a day	(30,000)
Mshwari fees[6]	(5,850)
County -License	(1,250)	county license	(1,250)
Operating Trade Profit	15,900	Total Taxes & Levies	(8,042)

Assumptions

VAT is standard Rated for all goods and services

SCENARIO 1 -TOT
Operating Trade Profit	15,900
Less Turnover Tax	(3,000)	Total Taxes & Levies	(11,042)
Net Profit	12,900		11.04%

 

SCENARIO 2- Personal Income Tax
Trade Profit	15,900
PIT -After Relief	(362)	Total Taxes & Levies	(8,404)
Net Profit	15,538	Effective Tax Rate	8.4%

 

SCENARIO 3 Personal Income Tax and VAT Registered[7]
Operating Trade Profit	15,900
Add-Input VAT recovered
Electricity	664
Supplies	4,800
Net Profit/Taxable Income	21,364
PIT -After Relief	(1,182)	Total Taxes & Levies	(3,760)
Net Profit	20,182	Effective Tax Rate	3.76%

Scenario 3 encourages small traders to register for VAT which is passed through to consumers; net effect is increased transparency and increased VAT collection for KRA.

 

	TOT	PIT	PIT +VAT Reg
Profit	12,900	15,538	20,182
Effective Taxes	11,042	8,404	3,760
Effective Taxes%	11.04%	8.4%	3.76%

An alternative tax plan to TOT would give a different result. If we the above scenario described her business, then under scenario one where she paid TOT, her profit  would be Kshs. 12,900. Under scenario two where she pays personal income tax, her profit would be Kshs. 15,538. And if she were registered for VAT and pays also PIT, she would have made profit of Kshs. 20,182.

The individual tax plan would therefore be more favourable to the poor income business groups than the TOT. Notice also that her business has contributed indirectly to the government revenue by more than Ksh. 8, 042. Then if subjected to the TOT of Ksh. 3000, she would have contributed Kshs. 11,042 to the government coffers.

Is it moral that a tax regime erodes business capital of the poor?

The start-up capital of small businesses comes from family resources, this according to McCormick et al. (1997)[8] limits the size of their business, the number of workers they would hire, and the level of profits they would generate. So, they have a limited amount available to reinvest. Mwangi (KNBS 2016) states that licensed micro establishments reported spending 45.3 percent of their net income on investments, either as reinvestment or investing in new businesses and investment in agriculture, while expenditure on household and family needs accounted for 44.5 percent. In 2016, Mwangi notes, small and medium establishments spent significantly high part of their net income on investment at 63.4 and 69.7, percent, respectively.

The erosion of capital from the small business in this manner, will delay their escape from poverty. Rather, allowing them to grow capital would help debunk the notion held by some including ILO (2002)[9] that link micro enterprise sector with poverty, because they earn less on average than those in formal jobs. For, as Watako (2016) found out,  “a significant number of entrepreneurs in the informal sector earn more, on average, than low-skilled workers in the formal sector”.

It is immoral to deny the poor a fair chance to compete in the market by imposing a tax on their businesses.

Governments have used taxes to shut out a section of the economy. Cheeseman, N., & Griffiths, R. (2005)[10] points out that turnover taxes can also be punitive when designed to create a disincentive for buying particular products. They cite the environmental regulations sometimes encourage this practice, taxing people more on purchases harmful to the environment.

Despite the expansive nature of the sector, aiming at bottom end of the pyramid is suspect for this regime that is struggling with a debt burden it is uncreative and evil.  We view TOT as an attempt to cut them from the market. These are the 1.3 million micro and small enterprises in Kenya, which according to a government survey of 2010, employed about 2.4 million people, a whole 17% of the total workforce in Kenya in 2009. They are engaged as follows: close to 2/3 two-thirds 64.1% of all enterprises were in the trade sector. Retailing made up 62% of all trading in Kenya. Manufacturing makes 13% while services 15%  (Watako 2016:207).

It is immoral for the government to burdens but not in equal measure apportion the benefit for the poor. 

In a Liberal democracy, argues Prof. Nicholas Wolterstorff of Yale Divinity School, the state should act impartially when distributing burdens and benefits to its citizens. Our government is absent in the lives of these poor citizens, because of the skewed development priorities. They live in squalor, with children attending overcrowded schools, dismal access to healthcare, main users of public transports on what is left of roads and in need of adequate food. But they now find it expedient to tax these businesses operating in margins of our nation, either in the slums of our cities and towns or the rural areas. Through their businesses they have improved their lot. Watako (2016: 209) illustrates how the micro and small entrepreneurs in Kariobangi influenced the well-being areas, as made up by the basic needs: business operations; access to health care; access to education; access to housing; access to water and sanitation; improved transportation means; increased food and increased incomes.

We can use taxes for good, to even out the inequalities in the society and give essential services for all citizens. Eric Nelson[11] a Harvard professor, explains this idea that the state should coercively maintain an egalitarian distribution of property, because it is the business of the state to engage in the redistribution of wealth through taxation thus make sure the welfare of the poor, and thus the genesis of welfare states in many European countries.

Forcing a blanket tax without regard to the business conditions of payees is reminiscent to the Colonial administration’s Hut and Poll tax of 1920s. Then, the local leaders and representative defended their people against the colonial extortion. Responding to the tax demands, the Luo leaders in Nyanza consulted and convened for a general meeting at Lundha, in Gem on 23 December 1921. About 9000 people attended from all parts of Nyanza to discuss a problem for the first time. They discussed Hut tax. During the meeting Chief Ogada Odera of Gem in Central Nyanza lamented: “As regards our taxes, they used to be sh. 3. Mr John Ainsworth (Nyanza Provincial Commissioner in Kisumu from 1906) told us that the amount would be increased to sh. 5, we agreed. The government then increased to sh. 8. It is very heavy. Besides, we do not want our women taxed.”

Chief Ogada, further made a perceptive comment: “As regards the word colony, the government came here and found us in occupation and now it calls us ‘wasumbni’ (their slaves)”. He was depicting his peoples’ fresh understanding of the changes.

Most commentators on TOT have sided with the government’s position and made a virtue of the extortion of the poor businesses by calling it fair, patriotic, easy to compute and complete. I think they are out of a limb.

There is a general recognition of the high revenue turnover in the informal sector.  “But the government was getting no tax benefit from these businesses,” Kamotho Waiganjo[12] writes,  “… those who operate in the formal sector, and who are therefore in the taxman’s spotlight,… cough up to 30 percent of annual profits as tax,… businesses in the informal sector means that many of the operators in this expansive sector escape the taxman’s dragnet. Not anymore.”

This assumption, that the poor in this sector churn considerable volume of revenue but do not contribute to the tax pool, is erroneous. TOT is an indirect tax on business and not a tax based on income from business profit. The informal sector businesses already pay other indirect taxes, levied on fuel, electricity, VAT on their goods and rent taxes collected from their rents. If they have to pay added tax, shouldn’t they also pay tax out of their business income, which comes under personal income tax regime and not the 30% corporations pay? Shouldn’t their costs of goods, business expenses, and other reliefs also be considered?

Some argue that the cost of compliance is low. It requires little documentation of the taxpayers in this bracket. All they need is a record of their sales. Those paying turnover tax will not need to worry about tracking their expenses, their tax is on turnover. It means that documents of greatest importance for the traders would be one’s showing their turnover.

Now this is putting a stumbling block on a blind man’s path. Keeping proper business records has more benefits to the business owners than just for TOT. Proper records would guide the business owners evaluate their business performance, monitor cost of purchases and sales, creditors and debtors and help in making crucial business decisions. The poor should be advised.

The consequences of eviscerating small businesses would be catastrophic owing to sector’s significance in the economy. It may arouse two major reactions from the poor:

First, if the small businesses scent extortion, they may disappear in thin air. These businesses are supersensitive to extortion by authorities and would hibernate, adjusting their operations till the conditions change. The damage in the wake of their disappearance can be devastating. Mr. Francis Atwoli the Secretary General of Central Organization of Trade Unions (COTU) following his assessment warned that further taxing the small and medium businesses will not only destroy the fastest growing sector of the economy but also render many Kenyans jobless.

A survey by the Kenya National Bureau of Statistics (KNBS) of 2016 shows that approximately 400,000 micro, small and medium enterprises do not celebrate their second birthday. Few reaches their fifth birthday- leading to concerns of sustainability of this vital sector. When pressured, they vanish in thin air.

Second, if the poor business owners interpret this tax as oppression, they will revolt. Implementation of TOT will conjure up the pain of the colonial era. The colonial hut and poll taxes became a heavy burden to the people of Kenya in the 1920s. B A Ogot[13] (2009:772) observes that it made worse by the method of collection which was ruthless and arbitrary. In Nyanza, they collected Hut Tax on all huts in the Kraal, including ‘duol’ and ‘abila’ (cattle sheds). When many people refused to pay these taxes, the colonial authorities including chiefs and tax clerks resorted to brutal methods of collection, ordering policemen chiefs and sub-chiefs to raid villages, set houses on fire, confiscate property or food stuff such as grains, bananas and cassava.

Since TOT will eat into the livelihood of these business owners, they will revolt. But they will crush their revolt, for lack the organisational capacity like that of the UK anti-poll tax groups of 1990. Introducing an unpopular “poll tax” is credited for forcing Mrs. Margaret Thatcher out of office in November 1990.

The green paper of 1986, Paying for Local Government, proposed the poll tax, which charged a fixed tax per adult resident for the services provided in their community, hence the term ‘poll tax’. It was a change from payment based on the worth of one’s house to a resident individual. The tax was, therefore, criticised as being unfair, and needlessly burdensome on those less well-off. What followed were protests and riots that prompted abolishing the tax following the change of the Conservative government November 1990.

What should KRA do with the poorer businesses?

The government and the KRA as the implementing body can act morally and avoid hurting the small-scale businesses. They can make it a priority policy to rationalize the informal sector rather than wipe it out through harsh tax policies. Turnover tax as enacted is elective, for which qualifying small businesses can opt to register for the standard tax system. This move would allow them to be recognised as other businesses. And with sound records, they may take advantage of comprehensive inclusion rules and a reduction process that requires maintaining proof of expenditure. We should make efforts in aiding the small-scale businesses, maintain proper business records and wean them into alternative tax regime.

This government should heed the words of Hubert Humphrey the former USA Vice President, who on the dedication of the Hubert Humphrey Building on November 1, 1977, said: “The moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; those who are in the shadows of life, the sick, the needy and the handicapped.”

The tinders are there waiting for something to ignite them. If the poor interprete these as days of extortion, we may as well have ushered in days of revolt.

 

REFERENCES:

[2] Mwangi Z. The 2016 National Micro, small and Medium Establishment (MSME) survey. (Kenya National Bureau of Statistics 2016)

[3] De Soto, H. (2000). The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books.

[4] Watako S. (2016) Impact of Business Information on Micro and Small enterprises as Agent of Poverty reduction in Kariobangi, UoN. PhD Thesis. 

[5] Kimaru, T. and Jagongo, A (2014). Adoption of Turnover Tax in Kenya: A Snapshot of Small and Medium Enterprises in Gikomba Market, Nairobi Kenya. International Journal of Social Sciences and Entrepreneurship, 3 (1), 18-30. 

[6] Trader uses Mshwari for working capital, interests at 7.5% per month.

[7] Allow Voluntary registration for traders who are below the threshold for compulsory VAT registration.

[8] McCormick, et al. (1997). Growth and Barriers to Growth Among Nairobi’s Small and Medium- Sized Garment Producers. World Development, 25 (7), 1095-1110.

[9] ILO. (2002). Employment, Incomes and Equality: A Strategy for Increasing Productive Employment in Kenya. Geneva: International Labour Organization.

[10] Cheeseman, N., & Griffiths, R. (2005). Increasing Tax Revenue in Sub-Saharan Africa: The Case of Kenya. Oxford Council on Good Governance, Economy Analysis, 6.

[11] Eric Nelson (2011) The Hebrew Republic: Jewish Source and The Transformation of European Political Thought. Harvard University Press 

[12] Kamotho Waiganjo 11th Jan 2020  Standard: There is little harm in more citizens carrying this tough tax burden.

[13] Ogot BA. 2009: A History of the Luo speaking people of Eastern Africa. Kisumu Kenya Anyange press ltd.

Canon Francis Omondi is a priest of All Saints Cathedral Diocese of the Anglican Church Of Kenya. He is also an adjunct lecturer at St. Paul’s University Limuru. Views expressed here are his own.

This article first appeared as Turnover Tax: Days of Extortion, Days of Revolt – The Elephant: https://www.theelephant.info/op-eds/2020/02/21/turnover-tax-days-of-extortion-days-of-revolt/

 

 

by Canon Francis Omondi

The Moi tree bore strange fruit.

You will know them by their fruits.

Do men gather grapes of thorns?

Or figs of thistles?  (Matt. 7:16)

 

Blood on the runways and blood on the walls.

Brutal blows; screams; coerced confessions:

Bulging prisons; fleeing citizens.

Strange fruit hanging from the Nyayo tree.

 

The irritating wind blowing our streets.

Swollen heads; broken limbs; fire red eyes;

Chocking cries ring the chaotic streets.

Fimbo ya Nyayo.

The Moi tree bore strange fruit.

Smoking fields, and smouldering houses,

The valley is not home again.

Bulging streets with homeless families;

While they say, lie envelop low.

 

The men they croon; and the children chant:

The Nyayo songs, our new must tune!

 

Every good tree cannot bring forth evil fruit,

Neither can a corrupt tree bring forth good fruit.

Every tree that bringeth not forth good fruit,

Is hewn down and cast into the fire. (Matt.7:19)

 

Wherefore by their fruit, ye shall know them. (Matt. 7:20)

The Moi tree also bore strange fruit.