Kenyatta Announces Tax Cuts in New Measures to Cushion Kenyans from COVID-19 Impact

Kenyan President, Uhuru Kenyatta

In a bid to mitigate the impact that the epidemic could have on the Kenyan economy, President Uhuru Kenyatta has announced immediate reduction of the VAT from 16% to 14%, effective April 1.

On Wednesday, Kenya confirmed 3 new cases of COVID-19 bringing the total number of cases to 28.

“I recognize the anxiety that this pandemic has caused millions of Kenyan families; fearful of what the future may hold for them and their children. And the possibility of job losses and loss of income weighing heavily on their minds,” Kenyatta said while addressing the nation on new measures. 

The measures, he said, are aimed at protecting jobs for ordinary Kenyans and to provide some certainty for both employees and their employers.

Ministries and Departments shall cause the payment of at least of Ksh. 13 Billion of the verified pending bills, within three weeks from the said date.

“Similarly, and to improve liquidity in the economy and ensure businesses remain afloat by enhancing their cash flows, the private sector is also encouraged to clear all outstanding payments among themselves; within three weeks from the date hereof”.

Kenya Revenue Authority shall expedite the payment of all verified VAT refund claims amounting to Ksh. 10 Billion within 3 weeks; or in the alternative, allow for offsetting of Withholding VAT, in order to improve cash flows for businesses.

Government in Kenya has also set aside Ksh. 1bn from the Universal Health Coverage coffers, be immediately appropriated strictly towards the recruitment of additional health workers to support in the management of the spread of COVID-19.

Government officials are to share the burden. Kenyatta said there will be a voluntary reduction in the salaries of the senior ranks of the National Executive. The President & Deputy President (80% cut), Cabinet Secretaries (30%), Chief Administrative Secretaries (30%) and  Principal Secretaries (20%). 

“I call on the other arms of Government and tiers of Government to join us in this national endeavour, by making similar voluntary reductions; which will free-up monies to combat this pandemic,” Kenyatta said.

In a bid to increase disposable income to the people of Kenya, the National Treasury will implements a number of immediate reliefs.

There will be 100% Tax Relief for persons earning gross monthly income of up to Ksh. 24,000 and Reduction of Income Tax Rate (Pay-As-You-Earn) from 30% to 25% as well as Reduction of Resident Income Tax (Corporation Tax) from 30% to 25%.

The President also announced a Reduction of the turnover tax rate from the current 3% to 1% for all Micro, Small and Medium Enterprises (MSMEs).

Government will appropriate an additional Ksh. 10 Billion to the elderly, orphans and other vulnerable members of our society through cash-transfers by the Ministry of Labour and Social Protection, to cushion them from the adverse economic effects of the COVID-19 pandemic.

Meanwhile, the Kenyan government announced a daily curfew beginning Friday, starting 7pm to 5am.

Kenyatta said all movement by persons not authorized to do so or not being Medical Professionals, Health Workers, Critical and Essential Services Providers, being prohibited between the said hours.

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