Salaried Kenyans to feel the heat as tax breaks end soon

Treasury CS Ukur Yattani. [Photo courtesy]

Salaried Kenyans are set to feel the pinch on their finances as tax breaks introduced by the government in March come to an end.

President Uhuru Kenyatta introduced the tax breaks to cushion Kenyans from the harsh economic times of COVID-19.

On Wednesday, National Treasury CS Ukur Yatani said that the government will revert to the old taxation system which includes normal rates for Value Added Tax (VAT), Pay As You Earn (PAYE) as well as corporation tax.

Yatani said that this move has been inspired by the need to fill revenue taxes gaps which were brought about by the tax relief introduced in March.

This means that VAT will go back to 16 per cent. It is currently at 14 percent while PAYE will revert to 30 per cent from 25 per cent.

“We are now in the process of reversing some of the interventions… It is clear that we are going to have a significant revenue shortfall, which is going to place pressure on expenditure,” said Yatani during a virtual Bloomberg Invest Africa event.

From the tax relief, Kenyans earning Sh24,000 and below had 100 percent tax break.

Combined, this has denied the Treasury Ksh79.4 billion since March.

A report issued by the Kenya Revenue Authority (KRA) recently indicated that between June and October, the taxman reported the loss of Ksh70 billion, a decline from the amount collected under the same period last year.

In 2021, the government projects that the economy will grow even with the pandemic.