Tax Reliefs to End in January, 2021, Cs Yatani

Tax cuts introduced in April to cushion citizens from the economic effects of the COVID-19 crisis will end come January 2021.

This is due to the country’s economy almost coming to a standstill in 2020 following the impacts of the pandemic.

National Treasury Cabinet Secretary Ukur Yatani on Friday said tax heads such as Value-added tax (VAT) and income tax would revert to their normal rates following an eight-month period in which they were reduced.

CS Yatani said this decision was informed by the loss of revenue, with the Government having to forego Sh65 billion in the period when Kenyans enjoyed the tax reliefs.

“Given the easing of containment measures and subsequent resumption of normalcy, it has, therefore become necessary to return to the pre-Covid-19 tax rates effective January 1, 2021,” said Yatani.

The maximum tax rate paid by employees and corporate tax by businesses will revert to 30% from the current 25%.

VAT, which is charged on every sale will go back to 16% from 14%.

Workers earning Sh24,000 and below will still continue enjoying the 100% tax waiver in what Yatani said was meant cushion low-income earners from the adverse effects.

The Government says it has been collecting less taxes, a situation that has seen it borrow more to cover the budget deficit – the difference between what it collects and what it spends.

Rather than cutting expenditure, the Government agreed with the International Monetary Fund (IMF) to increase tax collection as a condition of Kenya Receiving Sh250 billion in loans.

Already, the IMF has flagged the country as being at high risk of defaulting loans given the adverse effects of the pandemic on the economy.