The Finance and National Planning Departmental Committee has proposed exemptions for subsistence farmers and micro-enterprises with turnovers below one million shillings. This measure aims to mitigate the adverse economic impact on small-scale producers who have been excluded from formal business supply chains due to the stringent eTIMS requirements.
The Finance and National Planning Departmental Committee, chaired by Kuria Kimani, has highlighted substantial challenges in the rollout of the Electronic Tax Invoice System (eTIMS), particularly affecting small-scale farmers and micro-enterprises. The committee’s report, which scrutinizes the Finance Bill of 2024, underscores the deleterious effects of eTIMS on these groups, who find themselves unable to supply to formal businesses due to the system’s complexities.
“One of the biggest challenges is that the system has locked out these producers from supplying to formal businesses, which is deleterious for the economy at large,” the committee observed. This exclusion has significant ramifications, limiting market access for small producers and potentially stifling economic growth in the agricultural and informal sectors.
To rectify this, the committee has proposed exempting subsistence farmers and micro-enterprises with gross turnovers below one million shillings from the eTIMS requirements. This recommendation aims to re-integrate these small-scale producers into the formal economy, fostering inclusivity and economic resilience.
“The Committee further recommends the issuance of guidelines by the Kenya Revenue Authority (KRA) on the operationalization of this proposal,” the report stated. These guidelines are expected to provide a clear framework for implementing the exemptions, ensuring that the intended beneficiaries can navigate the tax system without undue burden.
The introduction of eTIMS was originally aimed at enhancing VAT collection and broadening the tax base. However, its implementation has faced criticism from various stakeholders who argue that the system’s complexity disproportionately affects smaller producers. By exempting those with lower turnovers, the committee seeks to balance the objectives of efficient tax collection and economic fairness.
This move has been welcomed by representatives of the affected sectors, who argue that the exemptions will provide much-needed relief. “Exempting small-scale farmers and micro-enterprises is a step in the right direction, acknowledging the unique challenges they face,” commented a stakeholder from the agricultural sector.
The committee’s report also notes the need for a simplified system that can still effectively collect taxes without relying solely on expanding the tax base through formalization. This balanced approach is expected to support Kenya’s broader economic goals while ensuring that smaller entities are not disproportionately disadvantaged.
The next steps will involve the Kenya Revenue Authority (KRA) formulating and publishing the necessary guidelines to operationalize these exemptions.
