The Kenya Revenue Authority has said it will incentivize the informal sector businesses in a bid to onboard them into the tax bracket, pointing towards increased revenue collection.

It says the move will also help address the challenges faced by the sector while leveraging the great tax potential it has.

Speaking during the 2023 Annual Tax Summit, KRA commissioner general Humphrey Wattanga said the sector is estimated to employ about 15 million people, accounting for 83 per cent of the country’s total labour force.

“This is a great tax potential and should be facilitated to uphold compliance,” Wattanga said.

The taxman targets to collect Sh2.8 trillion by the end of Financial Year 2023/2024, and surpass the Sh3 trillion mark by the next Financial Year.

It recorded a revenue collection of Sh2.2 trillion in the last Financial Year, compared to Sh2.03 trillion in 2021/2022.

Tapping into the informal sector as one of the initiatives to achieving set targets, the taxman says its confident it will achieve the set targets.

This is to enable the government finance its Bottom-Up Economic Transformation Agenda (BETA), and sustain the country's economy, KRA says in a statement.

“One of the initiatives under out tax base expansion programme is netting the informal sector into the tax bracket, the majority of whom are the MSMEs," Wattanga said.

"This, therefore, informs the need to design strategies and policy interventions to enable KRA tap this sector into the tax bracket.” 

It has affirmed to work with the National Treasury to establish policies that will simplify, harmonise and reduce the multiplicity of taxes obligated to the informal sector.

Wattanga added that KRA will also educate traders to appreciate the need for paying taxes.

Tax experts and technocrats present at the summit welcomed the move by the taxman reiterating the need to develop policies that will create a certain and predictable tax system as it will improve tax morale and subsequently inspire fairness, transparency and accountability.

They noted such policies will also enable simplicity and ease of tax compliance among taxpayers, and enhance tax system to absorb economic shocks and broaden the tax base.

Economic planning PS James Muhati said resilient tax systems have the ability to ensure revenues recover in the face of external economic shocks.

“Enhancement of tax policies enables the government to grow tax revenue, provide legal framework for introducing tax incentives, provide guidance, ensure certainty and establish coherence,” Muhati said.

Participants during the summit recommended regular reviewing and revision of tax laws to promote predictability and accountability of the tax system.

The Summit, held annually in the month of October, provides a platform for tax experts, policymakers, public servants, technocrats, civil societies, private sector actors and academia, among other stakeholders, to engage on pertinent issues that touch on tax systems.

Participants are drawn from the country and internationally.