Treasury Cabinet Secretary Ukur Yatani has announced that taxes cut during the start of the pandemic will revert to normal from January 1, 2021.
However, the CS said those earning below Sh24,000 will continue enjoying 100% tax relief by exempting them from Pay As You Earn (PAYE) tax.
“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 said.
Yatani on Friday said the move was necessitated by the ease of some of the containment measures and subsequent resumption of normalcy.
The CS said that effective from January 1, 2021, the Corporate Tax rate will revert to 30 per cent from the current 25 per cent.
The individual Income of Tax rate (VAT) will revert to 16 per cent from the current 25 per cent and the Value Added Tax rate VAT will revert to 16 per cent from the current 14 per cent.
The CS has reminded Kenyans that the government is not introducing the new tax rates, but just returning to the prevailing tax rate before the onset of the pandemic,
He added that 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.
Yatani added that the government has rolled out a medium, term Economic Recovery Strategy that will re-position the economy on the path to prosperity.
The Treasury lowered Corporate, PAYE, and VAT rates temporarily in April under the direction of President Uhuru Kenyatta as part of the government’s efforts to cushion Kenyans from the ravages of the pandemic.
The tax relief measures were deemed necessary to support Kenyan businesses and to provide critical relief to the most vulnerable in society.
Yatani said that by December 31, 2020, the government will have forgone tax revenues totaling Sh65 billion over the course of seven months.
“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.”