It’s ‘Njaanuary’ 2021 for Kenyans as Govt reverts to normal tax rates

NAIROBI, Kenya, Dec, 4 – As the government continues to roll out a post COVID-19 recovery plan, National Treasury Cabinet Secretary Amb. Ukur Yattani has announced that effective  January 1, 2021, the individual and corporate tax rates will return to 30 percent from the current 25  percent.

The move, the CS said is meant to enable the implementation of the government budget, amidst an economic meltdown occasioned by the coronavirus pandemic.

Yattani also announced Friday that the Value Added Rate (VAT) will revert to 16 percent from the current 14 percent.

“It is important to note that these are not new tax rates but just a return to the prevailing tax rate before the onset of the pandemic. This is indeed within the knowledge of all stakeholders,” the CS said.

The changes will however see the government continue cushioning low income earners by retaining the 100 percent tax exemption relief for those earning a monthly income of  Sh24,000 and below.

“Alongside these measure, the government will continue to roll-out interventions under the Sh58.1 billion economic stimulus programme such as Kazi Mtaani and others, to cushion vulnerable citizens and also enhance the liquidity of businesses,” he said.

Further, he said that the government has rolled out a medium term economic recovery strategy that will re-position the economy on a path of prosperity.

“Inspite of the pandemic’s effects, it is noteworthy that the national treasury and planning has continued t maintain macro-economic stability’s evidenced by the prevailing low and stable inflation and interest rates as well as a competitive exchange rate,” he said.

The government is currently grappling with a bloated wage bill and ballooning loans, despite a review on the country’s ceiling.

President Uhuru Kenyatta had in March 20 announced a stimulus package to address the impact of coronavirus on the economy.

The directive saw the income tax reduced from 30 percent to 25 percent.

The resident income tax was also reduced by the same margin.

In the changes, persons earning a gross monthly income of Sh24,000 received an additional disposable income of Sh1,600.

The turnover tax was also reduced from 3 percent to 1 percent.

With the Treasury announcement, Kenyans will be required to tighten their belts, as the effects of the pandemic are still far from over.