The National Treasury Cabinet Secretary UKur Yatani has announced that the government will reinstate the old tax rates on PAYE and VAT from January 1, 2021.
In a statement on Friday, December 4, Yatani stated that the government revenues took a significant dip as a result of the tax break adding that the government will have foregone tax revenues totaling Ksh65 billion by December 31, 2020.
“In respect to the foregoing, and given the easing of some of the containment measures and subsequent resumption of normalcy, it has, therefore, become necessary to return to the pre-COVID-19 tax rates effective 1st January 2020,” Yatani said.
The CS further stated that the decline in revenue has and will continue to affect the implementation of the government’s priority programmes under the Big Four Agenda and the general recovery of the economy.
“This in due course has and will affect the implementation of the government’s priority programmes under the Big Four agenda and the recovery of the economy in general,” he stated.
The latest announcement will see the corporate tax rate reverts to 30% from the current 25% while the individual Income tax rate reverts to 30% from the current 25%.
Value Added Tax rate reverts to 16% from the current 14%.
However, the CS also announced that those earning below Sh24,000 will be spared and will continue enjoying 100% tax relief.
“However, the government will continue to cushion the low-income earners, by retaining 100 per cent tax exemption/relief for those earning monthly incomes of Sh24,000 and below,” Yatani added.
In April 2020, the government reduced tax rates as part of a temporary measure to cushion Kenyans from the adverse effects of the Covid-19 pandemic.
President Uhuru Kenyatta ordered the lowering of corporate, individual income (PAYE) and Value Added Tax (VAT) rates.