What happened

A section of traders in Nairobi have shut their shops in protest over the Kenya Revenue Authority's (KRA) new customs benchmark, which sets a Sh3.2 million threshold for certain goods. The traders, primarily based in the city's central business district, have expressed concerns over the benchmark, arguing that it will significantly impact their businesses and increase the cost of doing business.

Context and background

The KRA, as the primary tax collection agency in Kenya, regularly sets benchmarks and guidelines to ensure compliance and streamline the customs process. However, this new benchmark has sparked controversy and led to a series of protests and closures among traders. The traders argue that the Sh3.2 million threshold is too high and will result in increased costs for importers, ultimately passing on the burden to consumers. They fear that this could lead to a decline in their profitability and potentially force many small and medium-sized enterprises (SMEs) out of business.

The KRA, on the other hand, maintains that the benchmark is necessary to curb tax evasion and ensure fair competition among traders. The authority aims to prevent under-declaration of goods, a common practice that results in significant revenue losses for the government. By setting a higher benchmark, the KRA hopes to deter such practices and promote transparency in the customs process.

This is not the first time that traders have clashed with the KRA over customs benchmarks. In the past, similar disputes have arisen, often leading to negotiations and adjustments to the guidelines. The current protest, however, seems to indicate a growing frustration among traders, who feel that their voices are not being heard.

Compared with what is normal

The Sh3.2 million benchmark is significantly higher than previous thresholds, which typically ranged from Sh1 to Sh2 million. This increase of over 50% is a cause for concern among traders, as it directly impacts their cash flow and profitability. While the KRA's intention to curb tax evasion is understandable, the sudden and substantial increase in the benchmark has caught many traders off guard and left them with little time to adjust their operations.

Why it matters

The impact of this new benchmark extends beyond the affected traders. As the cost of importing goods increases, consumers may also bear the brunt of higher prices. This could lead to a decrease in purchasing power and potentially affect the overall economic growth of the country. Additionally, if SMEs are forced out of business due to increased costs, it could result in job losses and a disruption to the supply chain, impacting various sectors of the economy.

Practical steps
  • Stay informed: Keep up-to-date with the latest developments regarding the KRA's customs benchmarks and any potential changes or negotiations.
  • Engage with industry associations: Collaborate with other traders and industry bodies to collectively voice your concerns and seek solutions.
  • Review your business operations: Assess the potential impact of the benchmark on your business and explore ways to optimize your processes to mitigate the increased costs.
  • Seek professional advice: Consult with tax experts or financial advisors to understand the implications of the benchmark and explore potential strategies to navigate the changes.

Talk to our team at Beavoren Ventures - info@beavorenventures.co.ke - to set up your systems correctly.

Disclaimer: This article is informational and does not constitute formal tax, audit, or legal advice. For guidance specific to your circumstances, please contact Beavoren Ventures.