Madam CEO Morning Thought
Madam CEO Dr. Esther Muchemi is always kind to share with us goodies.
See what she has to share with us today.
“THIS TAX- VAT
A most feared tax…
And this has occupied my mind the last couple of days-:
Did you know that ideally, this tax is not your cost or sales?
It’s charged on top of your sales and on top of your cost, for purposes of passing it over to the authorities.
But the principle only works if every person is compliant. Did you know that-:
If everybody was registered, every person would only pay for their value added tax in the chain?
Let me give you an example-:
If I buy a shoe on wholesale at 1000 KSH plus 16% VAT and pay 1160 (VAT 160) then sell the shoe at 1500 plus VAT and get 1740…(VAT 240)
Then I will only pay to the government, (240 -160) = 80/- representing a 16% on the 500 I got as my profit.
If my purchase did not have a VAT receipt, I lose the 160 to claim against my 240 and so I end up paying for the other person by remitting 240 to the authorities instead of 80 as it should be.
So you can see that a lot of trouble comes our way when we don’t separate the purchase plus VAT and our sales plus VAT, and both transactions are inclusive so to speak.
Our eco-systems are not perfect!
Some charge, others don’t!
When you comply and others don’t, your goods become more expensive!
It might even kill your business.
What are you supposed to do?
Do you join them or do you keep it straight?!
Tell me the genuine ‘on ground’ thoughts on this?
And so, when I saw this notice below, I said,
“Wow, this is ‘creativity’ at it’s best.”
In short it says-:
If your cost/ purchase did not have a VAT charged, it will not be allowed as an expense against your sales for tax purposes!
SMEs are in trouble here.
I guess everybody is being called into the straight and narrow .
You are indirectly being asked to be your brother’s keeper, if you trade with a “no VAT” person, then bear the cost, they are telling us!
My conversation to us today is as we close the year-:
Let’s plan for taxes, it looks like it’s going to be major and have a significant effect on our businesses and even our personal lives.
It reminds me of the famous quote of…
“They first came…”
It may be time for us to speak.
Take advantage of the tax amnesty that’s going on(consult a tax expert if need be).
I hear the big foreign investors are weighing their options, but we the SMEs are here to stay, so we must brace ourselves.
And yes, November has come, December is just around the corner.
Immediately after that, we will be in 2024, let’s start budgeting, planning etc.
What’s your gut feeling about 2024, if I may ask?
And we shall know the truth and the truth shall set us free.Over to you my people.Madam CEO”
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