NAIROBI, Kenya — The Kenya Revenue Authority (KRA) is preparing sweeping changes that could require small traders to charge 16pc Value Added Tax (VAT), in a move likely to increase compliance costs and push up consumer prices.
According to a Business Daily report, the tax authority is seeking to make VAT registration mandatory for all businesses by cutting the current Sh5 million annual turnover threshold to zero.
The proposal would effectively pull even micro and small enterprises into the VAT system, expanding the tax base.
The plan would introduce new reporting obligations for small traders, who would be required to register as VAT agents and account for the tax on their goods and services.
Analysts warn the shift could trigger price increases across a wide range of products as businesses pass the additional tax burden to consumers.
Currently, only businesses with annual taxable supplies of Sh5 million or more must register for VAT, though smaller firms may do so voluntarily. The standard VAT rate in Kenya is 16 percent on most taxable goods and services.
If implemented, the changes would mark a major policy shift targeting informal and small-scale traders, many of whom operate outside the VAT system.
Expanding mandatory registration is expected to boost tax compliance but could also increase administrative costs for small enterprises.
The proposal comes amid ongoing efforts by the taxman to widen the revenue base and tighten compliance across sectors, including closer scrutiny of businesses and expanded reporting requirements.
Economists caution that while broadening the VAT net may raise revenue, it risks squeezing small traders with limited capacity to manage tax filings, potentially affecting margins and competitiveness.
