Governments in developed and developing countries collect taxes to fund the public service. Marina et al. (2002) argue that “taxation is the only known mechanism of action by collecting resources to fund public use of goods and services used by any citizen ”.
However, this is not entirely true, as in developing countries; in particular, derive income from sources other than taxes, as well as non-tax revenue such as user fees and licenses charged for services provided by ministries, departments, and the agency, as well as income from the sale of state property and privatization. More than that,
Many developing countries rely on foreign aid as an external source of income.
Kenya’s dependence on overseas resources and borrowing has declined during the last five years, approximately 11% of the entire budget for member states of the East African network.
Tax insurance is at the heart of the political debate at the amount of the general public offerings that want to be provided and who have to pay due to the fact that the lease is the number one supply of sales is below government manipulate. except, taxes are used.
Assist inside the distribution of wealth and profits and management of the financial activity. Thus far, tax insurance selections have distinct consequences on extraordinary people, corporations and the financial system as an entire.
Article 209 of the Kenya constitution 2010 describes the energy to impose price lists or beautify sales for countrywide authorities and county authorities.
The position of sales responsiveness amongst those two governmental products is in step with the system of fraud, whose structure ensures the national government is more accountable to the Taxpayer and the critical thing tax bases. especially, the countrywide government can be liable for enforcing price lists, the tax will increase, customs responsibilities and excise responsibilities.
The justification for this is that the national government needs to maintain the ability to redistribute national resources and economic stability as key targets of tax systems.
Corporate tax is the same as individual income tax, only that it is levied on the company and has no maximum structure. Resident companies are taxed at a rate of 30% while non-resident companies are taxed at 37.5%.
Businesses in export processing zones that operate for the first ten years are exempt from paying any company tax, which is zero, but for those who work for ten years, they are charged 25 percent of their profits (tax incentive topics are discussed much later in this book).
The table also contains information on the corporate income tax rate for new companies listed in the Nairobi Securities Securities for the capital component and period.
Literature shows that MSMEs in Kenya are very active in the informal sector. The sector accounts for 80.8% of Kenya’s total employment by 2011 (Economic Survey 2012).
Sales tax (TOT) was introduced by the Finance Act, 2007 through the provision of the Income Tax Act, Chapter 47 as an alternative to formal taxation. Effective January 1, 2008. According to KRA, Sales tax should apply to any resident whose turnover does not exceed Ksh. 5 million at a 3% income level.
The aggregate applies to the following businesses, which are: business, professional or vocational and every manufacturing, appetite, and concern in the nature of the business.
However, it does not include income from the following:
- persons whose business income has an annual income of less than Ksh. 500,000,
- employment income,
- income exemptions that fall under Schedule 1 of the Income Tax Act,
- business income, subject to final withholding tax,
- a small company,
- rental income,
- technical or management fees.
In addition, KRA introduced early tariffs as a further attempt to find wholesalers and as a way to formalize informal businesses. This tax applies to commercial and public car owners. It is not a final tax, but a portion of the tax paid in advance before a public service vehicle or commercial vehicle is registered or licensed and the purpose is to ensure compliance.