Street hawkers are contributors to customs taxes. I can hear the question: how? Have you ever walked through a Kenyan market and marveled at the sheer variety of goods for sale? From the latest phone chargers to stylish second-hand clothes, the market is a kaleidoscope of consumer products.
These goods are a testament to the hustle of street hawkers, who often work in a gray area of the formal economy. But what many people do not realise is that these vendors are actually silent partners in a major government revenue stream: customs taxes.
Although the street hawkers may not directly interact with the tax commissioner at the Kenya Revenue Authority (KRA), their business operations are within the organisation’s mandate. Street hawkers are deeply connected to the payment of customs taxes on imported goods. Let us break down this surprising and crucial link.
The Invisible Chain of Customs Taxes
Think of it like a chain reaction. The goods a street hawker sells do not just appear on the streets. They start their journey far away, in countries like China, Turkey, or the US, and travel thousands of miles to reach Kenya. At every step of this journey, taxes are being paid, and the cost of those taxes is passed down until it reaches the final seller and, ultimately, the consumer. Let us see how:
a. The Importer Pays, the Hawker Contributes
The process begins with large-scale importers. They are the ones who deal with the KRA at the port of entry. When they bring in a container of electronics or bales of “mitumba” (second-hand clothes), they are required to pay customs duties and other levies.
The customs duties and other levies are paid as per the East African Community Customs Management Act (2004). These taxes are calculated based on factors like the goods’ value, insurance, and freight costs. The importer, a registered business, pays this tax.
b. The Cost is Embedded
Now, here is the key. To make a profit, the importer includes the cost of the customs taxes in the wholesale price of the goods. When a street hawker buys their stock from this importer or a wholesaler, they are paying a price that already has the import duties built into it. So, while they do not hand the money directly to KRA, they are effectively reimbursing the importer for the tax they paid.
The Mitumba Example
The mitumba trade is a perfect illustration of this. Kenya’s mitumba sector is a massive economic engine, employing countless street hawkers. When a bale of mitumba is imported, it is subjected to significant customs taxes. The importer pays these taxes to clear the goods.
When a hawker in Gikomba or Muthurwa market buys a bale, the price they pay reflects all these costs, including the import duty. Each T-shirt or pair of jeans they sell has a hidden customs tax component, a silent contribution to the national budget.
This indirect contribution is a powerful reminder that the formal and informal economies are not separate. They are deeply intertwined. The money a street hawker uses to buy stock is already working its way through the formal tax system.
What Can Be Done?
Acknowledging this contribution is a crucial first step. But to unlock the full potential of these taxpayers and increase tax revenue for the country, more needs to be done. What can be done to unlock the tax potential?
a. Formalisation and Simplified Taxes
The government can introduce simplified tax systems that make it easy for street hawkers to transition from indirect to direct taxpayers. A presumptive tax (currently suspended) based on turnover or a flat tax model could work. This would not only increase revenue to the government but also give hawkers a sense of ownership and legitimacy.
b. Education and Awareness
Many street hawkers are unaware of their indirect tax contributions. Providing educational resources on how they are already part of the tax system can foster a more cooperative relationship with the tax commissioner. This will go a long way in building trust and encouraging voluntary tax compliance.
c. Strategic Partnerships
The government, through the tax commissioner, can partner with business associations and non-profit organizations. This will help formalise hawkers’ businesses and give them access to financial services and business training.
Final Thoughts
By recognising the vital role street hawkers play in the tax ecosystem, the government can shift its approach from enforcement and harassment (county askaris) to collaboration and empowerment. This would not only boost revenue but also create a more stable and prosperous environment for millions of Kenyans.
