By David Wanjala
The year 2018 has been a tough one for Kenyans financially. The effects of the capping of interest rates on loans from commercial banks continued to bite, stagnating growth especially in the SMEs as banks preferred trading with government securities that are considered safer.
Investing in the stock market has had its fare share of downs. As at the early weeks of December, it was reported that close to a third of the listed companies had shed a total of Sh14 billion in their first half-year net earnings. Athi River Mining and Deacons have gone into receivership because they are all choked in debt. The biggest loser, however, has been the common mwananchi who suffered the brunt of austerity measures, mainly layoffs, by the affected companies.
Majority of the companies that made profits at the bourse, according to financial experts, were banks. A total of Sh87 billion was raked in by the banks with much of it coming from trading with Government at the expense of SMEs. SMEs especially those in the informal sector are now going to be targeted net by the taxman. This is after Kenya Revenue Authority (KRA) said that as from January 2019, these businesses risk failing to have their licenses renewed if they do not log onto its iTax platform and pay the presumptive tax. Failure to do so will force respective county government’s not to renew the existing licenses.
The presumptive tax will be at the rate of 15% of the business permit fee or license payable. The tax was introduced by Treasury to target informal traders who record revenue of less than Sh5 million. M-Pesa Pay Bill number 572572 will be used to make payment after generating a receipt from the iTax portalA survey by the Kenya National Bureau of Statistics (KNBS) titled Micro, Small and Medium Establishments revealed how most businesses shut down have. The blame being squarely on shortage of operating funds as a result of credit squeeze by banks, declining income amongst Kenyans and an increase in operating costs for businesses in the country. With this new tax, a fruit of the Finance Bill 2018, traders who have consistently complained about the deteriorating business conditions will now be faced with an additional cost. On the upside, KRA will be able to get more data on the informal sector. This is just manifestation of the high taxes the citizenry face and effects of the Finance Bill taking a toll as the taxman seeks to meet her revenue targets.
According to KNBS’ 2017 data, three quarters or 1.9 million Kenyans in the formal sector earn less than Sh50 000. These numbers include domestic house workers, drivers, secretaries, low ranking teachers and police officers. 76,804 Kenyans who earned Sh100, 000 or more in this bracket were professionals with several years experience, State Officers and managers and they represented the middle class. Never mind the country’s gross monthly per capita income stood at Sh14, 508.
With political stability and rains slowly coming back, business will once again, assumedly, thrive in enabling environment. Aren’t they the facts that government has always blamed for a crumbling economy? Simplistic. Businesses and citizens are dying under the heavy weight of high taxes that are not prudently utilised, poor service delivery and lack of credit to open and run their enterprises. 2019’s horizones should surely hold a better hope for Kenyans?