Finance Bill 2024: Kenya's Private Sector Opposes KSh 2m Fine On Small Businesses Over KRA's ETIMS

• The Kenya National Chamber of Commerce and Industry (KNCCI) said placing a penalty of Ksh 2 million a month on businesses that make less than half of that in a year will lead to closures and job losses
• KNCCI argued that the proposed penalty is punitive and will severely impact MSMEs, which contribute about 40% of GDP and employ more than 80% of Kenyans
• KNCCI advocated for a phased approach to eTIMS implementation, suggesting a grace period or a tiered penalty system instead of a KSh 2 million penalty

Elijah Ntongai, a journalist at TUKO.co.ke, has more than three years of financial, business, and technology research expertise, providing insights into Kenyan and global trends.

Nairobi, May 20, 2024 – The Kenya National Chamber of Commerce and Industry (KNCCI) has expressed strong opposition to the proposed imposition of a KSh 2 million penalty for non-compliance with the Electronic Tax Invoice Management System (eTIMS).

KNCCI argued that the penalty that has been proposed in the Finance Bill 2024 is punitive and will have severe repercussions on Micro, Small, and Medium Enterprises (MSMEs).

KNCCI opposes eTIMS non-compliance fine

In a statement released on May 20, KNCCI, which represents the private sector, acknowledged the government's efforts to streamline tax collection and enhance compliance through the adoption of eTIMS.

"While we recognise the government's efforts to streamline tax collection and enhance compliance through the adoption of eTIMS, we believe that the proposed penalty is punitive and will have severe repercussions on Micro, Small, and Medium Enterprises (MSMEs). MSMEs are the backbone of our economy, contributing about 40% of GDP and employing more than 80% of Kenyans," said KNCCI in a press release signed by Erick Rutto.

Why KNCCI is against proposed penalty

The chamber highlighted the results of their Quarterly Business Barometer Survey for Q2/2024, which revealed that over half of the respondents were businesses with annual revenues below KSh 1 million and operate in the informal sector.

"In the KNCCI Quarterly Business Barometer Survey for Q2/2024, more than half of the respondents were businesses that have less than Ksh. 1 million in annual revenue, reflecting Kenya's economy. Placing a penalty of Ksh 2 million a month on businesses that make less than half of that in a year will lead to closures and job losses," read the statement by KNCC1.

The chamber advocates for a more phased approach to implementing eTIMS, which would allow businesses time to adapt without the immediate threat of severe penalties.

They suggested a grace period or a tiered penalty system, where initial non-compliance results in warnings or smaller fines, escalating only if non-compliance persists.

The announcement by KNCCI comes after Edible Oil Manufacturers also termed a proposed 25% excise duty on vegetable oil an economic miscalculation.

What to know about Finance Bill 2024 tax proposals

• List of income tax, VAT, and excise duty changes proposed in Finance Bill 2024.
• List of online businesses and freelancers targeted for tax in Finance Bill 2024.
• President William Ruto defended the new tax measures, saying that the country lags behind in terms of tax ratio to revenue.
• The Edible Oil Sub Sector of the Kenya Association of Manufacturers has strongly objected to the proposed 25% excise duty on vegetable oils.

Proofreading by Otukho Jackson, a multimedia journalist and copy editor at TUKO.co.ke