Nairobi — Kenyans will face tough times from January following the reversal of tax rates that were reduced as part of the government’s stimulus package in March due to the COVID-19 pandemic.
The National Assembly on Tuesday approved the reversal of the key tax rates which will take effect in January 2021, signaling tough times ahead at a tie the economy is struggling to revive.
Members of the National Assembly were focusing on the proposed reversal of Pay as You Earn (P.A.Y.E) and Corporate Tax from 25 percent to the normal 30 percent and Value Added Tax (VAT) to 16 from 14 percent.
“Pursuant of provisions of sections 6 and 67 of the Value Added Tax Act 0f 2013 approves the Value Added Tax Amendment of the rate of tax 2020, will as many of that opinion say eye and will as many of contrary opinion say nay, the eyes have it,” Speaker of the National Assembly said.
The majority of MPs led by Garissa Township MP Aden Duale and his Homabay Counterpart Peter Kaluma supported the motion saying the taxes are the country’s main source of revenue.
“This is a source of revenue that we could ill afford to reduce. We are now in a situation where we cannot afford to pay for essential services and we do not know when those situations will end. We now have reduced time for trade among other things,” Kaluma said.
“No we only have the option of borrowing and we also know the pressures of repaying those loans a cry we have had before.”
Kikuyu MP Kimani Ichung’wa was however, opposed to the motion saying Kenyans are still feeling the effect of the Coronavirus pandemic thus they should continue being cushioned.
“Any increment of VAT today will go back to the consumers and hurt the people of Kenya. I want to be on record that I am not in the chorus to increase VAT from 14 to 16 percent at this particular time. Indeed the President directed the Treasury to allow this provision to exist until July of 2021,” said Ichung’wa
The tax exemptions had been issued by President Uhuru Kenyatta to cushion Kenyans against the economic meltdown occasioned by COVID-19 pandemic.
According to Treasury Cabinet Secretary Ukur Yattani, the government will continue cushioning low-income earners by retaining the 100 per cent tax exemption relief for those earning a monthly income of Sh24,000 and below.
The stimulus package was announced in March when the first case of COVID-19 was confirmed in the country.