Taxing Africa’s informal economy

African countries are trying to find ways to charge more taxes to the informal sector that contributes about 55 per cent of sub-Saharan Africa’s gross domestic product.

AFK Insider reports that Kenya plans to widen the tax net to make every eligible tax payer – including the ones in the informal sector – pays tax. With the new tax collection method, the presumptive tax, Kenya will impose an advance levy on businesses that operate informally and without proper documentation. Until about fifteen years ago, Kenyan farmers paid taxes in before selling their produce at market.

In the new government plans, farmers are to pay a fraction of their anticipated sales to an appointed agent. In this way, cane farmers would pay taxes to sugar millers and maize growers would pay taxes to the National Cereals and Produce Board.

Uganda and Tanzania are planning similar measures. In Uganda, one in five households own an informal business, Bloomberg reported.

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Image by Cayambe, via Wikimedia Commons


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