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COVID-19 CRISIS: Kenyatta announces 100% tax relief for workers, salary cuts for govt officials in Kenya

CONRAD AHABWE | PML Daily Senior Correspondent by CONRAD AHABWE | PML Daily Senior Correspondent
March 25, 2020
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President Uhuru Kenyatta (PHOTO/File).

NAIROBI – Kenya President Uhuru Kenyatta has announced a 100 % tax relief for persons earning gross monthly income of up to Ksh. 24,000 (about Shs880,000) as the country seeks to protect its citizens from the effects of coronavirus.

Mr Kenyatta also announced that senior government officials such as President, Deputy President, Cabinet Secretaries, Chief Administrative Secretaries and Principal Secretaries have offered a voluntary reduction of their salaries to free up more funds for the government.

In a state of the nation address on Wednesday, March 25, 2020, where he also announced a national lockdown starting Friday, Mr Kenyatta announced reduction of Income Tax Rate (Pay-As-You-Earn) from 30% to 25%, and Resident Income Tax (Corporation Tax) from 30% to 25% “in order to protect jobs for our people and to provide some certainty for both employees and their employers.”

He also announced a reduction of the turnover tax rate from the current 3% to 1% for all Micro, Small and Medium Enterprises (MSMEs).

The President also announced appropriation of an additional Ksh. 10 Billion to the elderly, orphans and other vulnerable members of our society through cash-transfers by the Ministry of Labour and Social Protection, to cushion them from the adverse economic effects of the COVID-19 pandemic.

He also ordered temporary suspension of the listing with Credit Reference Bureaus (CRB) of any person, Micro, Small and Medium Enterprises (MSMES) and corporate entities whose loan account fall overdue or is in arrears, effective 1st April, 2020.

“The National Treasury shall cause immediate reduction of the VAT from 16% to 14%, effective 1st April, 2020. That all Ministries and Departments shall cause the payment of at least of Ksh. 13 Billion of the verified pending bills, within three weeks from the date hereof. Similarly, and to improve liquidity in the economy and ensure businesses remain afloat by enhancing their cash flows, the private sector is also encouraged to clear all outstanding payments among themselves; within three weeks from the date hereof,” he said.

Mr Kenyatta directed the Kenya Revenue Authority to expedite the payment of all verified VAT refund claims amounting to Ksh. 10 Billion within 3 weeks; or in the alternative, allow for offsetting of Withholding VAT, in order to improve cash flows for businesses.

He also directed that Ksh. 1.0 billion from the Universal Health Coverage kitty, be immediately appropriated strictly towards the recruitment of additional health workers to support in the management of the spread of COVID-19.

Mr Kenyatta also announced that the Central Bank was lowering the Central Bank Rate (CBR) to 7.25% from 8.25%, which will prompt commercial banks to lower the interest rates to their borrowers, availing the much needed and affordable credit to MSMEs across the country.

He added that the Central Bank was lowering the Cash Reserve Ratio (CRR) to 4.25 percent from 5.25 percent to provide additional liquidity of Ksh. 35 Billion to commercial banks to directly support borrowers that are distressed as a result of the economic effects of the COVID-19 pandemic.

“The Central Bank of Kenya shall provide flexibility to banks with regard to requirements for loan classification and provisioning for loans that were performing as at March 2,2020 and whose repayment period was extended or were restructured due to the pandemic,” he said.

The move came after the country confirmed three more coronavirus cases on Wednesday, bringing the number in the country to 28.

“Effective Friday, 27th March, 2020; a Daily Curfew from 7 p.m. to 5 a.m. shall be in effect in the territory of the Republic of Kenya, with all movement by persons not authorized to do so or not being Medical Professionals, Health Workers, Critical and Essential Services Providers, being prohibited between those hours (The full list of Critical and Essential Service Providers is annexed to this Statement),” he said.

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