December will be the last month Kenyans enjoy the Covid-19 tax reliefs announced by President Uhuru Kenyatta in April 2020.
Treasury Cabinet Secretary Ukur Yatani said on Friday that in respect of the easing of containment measures and subsequent resumption of normalcy, it has, therefore, become necessary to return to pre-covid-19 tax rates from January 1, 2021.
Yatani said in the statement the corporate tax rate will now revert to 30 per cent from the current 25 per cent. The individual income tax rate will revert to 30 per cent from the current 25 per cent, while the value added tax rate (VAT) will go back to 16 per cent from the current 14 per cent.
“It is important to note that these are not new tax rates, but just a return to the prevailing tax rate before the pandemic. This is indeed within the knowledge of all stakeholders,” Yatani said.
He defended the move on grounds that the tax relief measures were temporary and were deemed necessary to support Kenyan businesses and provide critical relief to the most vulnerable in the society.
He said until December 31, 2020, when the tax reliefs expire, the government will have foregone revenues of Sh65 billion and this will affect implementation of the Big Four Agenda and recovery of the economy in general.
He said the government will continue to cushion low-income earners by retaining 100 per cent tax relief to those earning monthly incomes of Sh24,000 and below.
“Alongside these measures, the government will continue to roll-out interventions under the Sh58.1 billion economic stimulus programme (ESP), such as Kazi Mtaani and others, to cushion vulnerable citizens and also enhance the liquidity of businesses,” Yatani added.
“Further, the government has rolled out a medium term economic recovery strategy that will reposition the economy on a path to prosperity.”