Kenya Parliament Approves Return of Pre-COVID Tax Rates in 2021

Kenya’s parliament approved on Tuesday approved Treasury’s decision to revert taxes to Pre- Covid levels in January 2021  to manage the growing revenue deficit.

The government in March temporarily reduced taxes aimed at offering a reprieve for businesses and consumers who had been adversely affected by the pandemic. In this case,  income tax was reduced by 5.00% to 25.00% while VAT was cut by 2.00% to 14.00%.

“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.  

However, the legislators voted to ensure Kenyans earning less than Ksh 24,000  will still be granted 100% tax relief.

According to the most recent government publication of the ‘Statement of Actual Revenues and Net Exchequer Issues’, Ksh 101.35 billion in tax revenue was collected in the month of November, which is about 22.00% lower than in a comparable period a year before.

“With the cost of debt financing rising, debt sustainability concerns remain a key sticky point for the government. This may largely explain the decision to revert taxes to pre-COVID levels at the start of January 2021 in a bid to manage the growing revenue deficit,” NCBA Analysts say.

READ

• Treasury Mulls Raising Ksh 75 Bn from Domestic Market in January
• Kenya’s Central Bank Cuts 2020 Economic Growth Projection to 1.3%
• Kenya’s Economy to Contract 1.0% in FY21: World Bank