Kenya Revenue Authority (KRA) recently introduced a new system targeting informal businesses, which is part of the government’s efforts to broaden the tax base and increase revenue collection.

The taxman launched the electronic Tax Invoice Management System (eTIMS) mainly to expand the tax bracket to the informal sector, under tight scrutiny.

While these measures are projected to yield an additional Sh200 billion annually, they have not only unveiled notable challenges but also led to serious implications for businesses.

This tax landscape disproportionately burdens startups and small enterprises. It is such imbalances that restrict the ability to reinvest, expand, and innovate, hindering overall economic growth.

For instance, the implementation of contentious taxes, such as the 100 per cent increase in VAT on fuel to 16 per cent and the 1.5 per cent levy for affordable housing projects, has sparked concerns among employees and business owners.

Taxation is undoubtedly essential for societal functioning. However, Kenya’s tax policies have become cumbersome and arbitrary, placing undue pressure on businesses and impeding growth.

Regrettably, these tax measures have precipitated adverse consequences, leading to the closure of numerous firms unable to withstand the challenging conditions. Others resort to evading taxes altogether, further exacerbating the situation.

While initiatives like eTIMS aim to broaden the tax base to include the informal sector, they encounter hurdles such as high administrative costs and a prevalence of unregistered businesses.

Failure to address these challenges could jeopardise the viability of enterprises, potentially resulting in further closures.

Moreover, despite the government’s attempts to bolster revenue through fresh levies and modifications, tax compliance has not increased much, with collections falling short of targets.

President William Ruto’s controversial revenue plan has not only faced resistance but has gone a long way to impede his fiscal objectives.

This setback has significant ramifications, particularly in financing essential projects and managing mounting public debt amidst heightened concerns over the soaring cost of living.

Let the experts start smelling the coffee and move to address these imbalances in the tax regime and consider a multi-faceted approach that promotes tax compliance while fostering an environment conducive to business growth.