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4 | NEWSFOCUS October 23, 2018 www.mygov.go.ke MSME’s play a key role in boosting Kenya’s economy The informal sector accounted for 35-50 per cent GDP in Kenya in 2012, according to the IEA T axing the informal economy especially in developing countries has elicited increasing attention over the recent years as governments in these countries seek to seal revenue gaps, promote growth and boost governance. The informal sector constitutes a huge percentage and, in many countries, growing share of Gross Domestic Product (GDP) hence representing a potentially significant source of tax revenue. Thanks to the “MSE ACT 2012”, the Kenyan MSME sector (majority of whom are in the informal economic sector) is now clearly segregated into four main subsectors (Manufacturing-Artisans, Small Traders, Service providers and Agro-based) and it is now possible to have targeted interventions. In the recent past, a lot has been done by Kenya Revenue Authority (KRA) in partnership with stakeholders in various sectors of the economy to boost tax compliance. We are cognizant of efforts to reach taxpayers in various tax segments including the MSMEs. For a long period now, the government through KRA has implemented various taxes such as Value Added Tax (VAT), Capital Gains Tax, Excise Tax, Turn Over Tax (ToT) etc. Of importance is Turn Over Tax, introduced through the Finance Act 2007, targeting taxpayers whose turnover from business exceeds Kshs. 500,000 but does not exceed Kshs. 5million annually. The tax mainly targets traders and artisans popularly referred to in informal sector as “Jua Kali”. The introduction of this tax was meant to be an easier taxation method aimed at simplifying the taxation process in the informal sector to rake in more revenue for the government. To enhance compliance in the informal sector, the government through the budget statement of 2018/19 introduced a better, in my view, simplified tax known as the presumptive tax. The tax will be pegged on single business permits issued by county governments and is payable at the time of payment for a single business or its renewal by a trader. The proposed rate is 15 per cent solely pegged on a business permit. Further, unlike TOT which was accounted for every four months, presumptive tax is a once a year payment hence saving traders the hustle of filing returns every quarter. This means that a trader whose business permit fee is, for instance Kshs 10,000, will pay a presumptive tax of Kshs, 1,500 only. This move is expected to bring on board more taxpayers in the informal sector and enhance tax compliance. With close collaboration among the KRA, the National Treasury, County Governments and stakeholders in the informal sector, the government is expected to raise approximately Kshs. 5 billion annually. According to Budget Focus, a publication of the IEA Budget Information Programme released in 2012, the informal sector accounted for 35-50 per cent GDP in Kenya. The report further indicates, the informal sector accounted for 77 per cent of employment opportunities especially among the youth. We in the informal sector are geared towards playing a critical role in boosting the government’s development agenda and hope that taxation on the informal sector would increase labour productivity and output through reducing economic distortions, increased service and access to government procurement. We are ready to embrace new initiatives introduced by KRA and the government at large through a collaborative process that takes into account the jua kali sector’s unique needs. If well thought out and well implemented, we expect to see a strong linkage and partnership between the traders, county governments and central govern1,500 KRA Tax ambassadors from different universities follow proceedings of the 4th Annual Tax Summit at the Kenya School of Monetary Studies, Nairobi Presumptive tax that a trader whose business permit fee is, for instance Kshs 10,000, will pay ment. We expect KRA to carry out an awareness campaign and create an informal sector information desk while being sensitive to the jua kali sector unique needs. Taxation to the MSME sector should be facilitative and not prohibitive, aimed at maintaining its strategic position as the major employer in our country and encourage increased startups while boosting innovation and entrepreneurship. We expect to see our tax policies being driven towards confronting low productivity, high production input costs, low skills, high unemployment etc. A presumptive tax regime in my view takes cognizance of the uniqueness of the Jua Kali sector and thereby allows the informal sector firms to pay substantially lower tax rates than those under the standard regime. This will enable the sector access to credit, offer opportunities to engage with larger firms and the government and reduce harassment while improving access to training and support programmes. The channels of interaction between the informal sector and state institutions including KRA need to be constantly improved and institutionalised while at the same time dealing with the sector’s attitude towards the regulatory regimes- the sector needs to see improved service provision and the benefits of compliance. We believe through the introduction of a level playing field through taxes such as the presumptive tax, Kenya is expected to experience an uptake in establishment of more MSME’s and startups. This will not only increase employment, but also a shift by the youth who will stop relying on white collar jobs and instead embrace of various opportunities in the Jua Kali sector. Richard Muteti, CEO Jua Kali Federation of Kenya/Chairman, COMESA Business Council SMEs Work-Group NATIONAL INNOVATION AWARD - 2018 The Kenya National Innovation Agency (KENIA) is established under the Science, Technology and Innovation Act, No. 28 of 2013 and mandated to develop and manage the Kenya National Innovation System. KENIA wishes to announce the call for the National Innovation Award – 2018. The purpose of the Award is to stimulate and strengthen the national innovative capacity and culture within the system of innovation. The objective is to motivate and recognize innovators, as well as encourage innovation in national priority areas. The call will focus on the key areas of National Development Agenda and innovations will be evaluated as per the following themes: Theme 1: Theme 2: Theme 3: Theme 4: Theme 5: Health; Housing Technologies and Environment; Agriculture, Food Technologies and Food Security; Energy Systems; and Manufacturing, Engineering and ICT. A winner will be selected in each thematic area and an Innovation Award worth Kenya Shillings Eight Hundred Thousand (Ksh. 800,000.00) will be granted. Interested innovators are advised to apply online by filling in the online application form in the website: www.innovationagency.go.ke. Terms and conditions apply. All applicants MUST register the innovation first then proceed to apply. The Closing Date for Applications is Wednesday, 14th For any questions email secretariat@innovationagency.go.ke. The Secretariat Kenya National Innovation Agency 9th Floor, Utalii House NAIROBI November, 2018 at 5.00pm Market approach Country : KENYA INSTITUTE OF CURRICULUM DEVELOPMENT SPECIFIC PROCUREMENT NOTICE (CONSULTING SERVICES – FIRMS SELECTION) REQUEST FOR EXPRESSION OF INTEREST International Competitive Bidding : Kenya Name of the Project: Secondary Education Quality Improvement Project (SEQIP) Credit No Assignment Title Reference No : : IDA – V0420 CONSULTANCY FOR DEVELOPMENT AND INTRODUCTION OF A COMPETENCY BASED CURRICULUM FOR GRADES 4 TO 9 UNDER THE SECONDARY EDUCATION QUALITY IMPROVEMENT PROJECT (SEQIP- P160083) : KE-KICD-80481-CS-QCBS The Government of Kenya has received financing from the World Bank to support the Secondary Education Quality Improvement Project (SEQIP) and Kenya Institute of Curriculum Development (KICD), as one of the implementing agencies, intends to apply part of the proceeds for consulting services. The consulting services (“the Services”) include provision of technical skills on development and roll out of a Competency Based Curriculum (CBC) for grades 4 to 9. KICD now invites eligible national and international consulting firms to indicate their interest in providing the Services. Detailed Terms of Reference (TOR) and REOI document are found at www.kicd.ac.ke. The deadline for submission is 12th November, 2018. DIRECTOR/CHIEF EXECUTIVE OFFICER

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