MPs to hold special sitting on planned COVID-19 tax reversals

The National Assembly is expected to make the final call on the planned reversal of key tax rates effected as cushioning to Kenyans following the advent of COVID-19.

In a special gazette notice, Speaker of the National Assembly Justin Muturi indicated that the House will hold a special sitting on December 22.

On the agenda will be consideration of the Tax Laws (Ammendment) Bill No.2, 2020.

The Bill encompasses the planned tax reversals and the tabling of the Value Added Tax (Ammendment of the Rate of Tax) Order, 2020.

If adopted, the two pieces of legislation will see the reversal of key tax rates including pay as you earn (PAYE), corporation tax and VAT.

For instance, PAYE will be reverted to a higher rate of 30 per cent from the current 25 percent.

The rate of resident income tax (corporation) tax will be adjusted upwards by a similar margin.

Similarly, VAT will revert to its higher rate of 16 per cent from the current 14 per cent.

Earlier this month, the National Treasury indicated the end of the government cushioning measures through the planned reinstatement of higher rates of tax from January 1.

This in view of reinstating crucial revenue flows for government with the exchequer estimating the loss of Ksh.65 billion in tax revenues for government over the stay of measures.

The push for a reversal has been baked by President Uhuru Kenyatta indicating the planned reinstatement of the old tax rates is likely to sail through Parliament and assented to before the first day of the New Year.

The planned reinstatement of higher tax rates has however drawn criticism from economic experts who have argued for an extension of term for the cushioning measures beyond January 1.

“We’ve seen a steeper second wave of COVID-19 infections with even more dire effects than the first. We would propose the cushioning measures stick,” said economist Edward Kusewa in an earlier interview.

“Some of these measures have served as a lifeline for many Kenyans, think for instance of the waiver on free mobile-money transfers below Ksh. 1000.”

COVID-19 cushioning measures have quickly lapse over recent months signalling the end of the government’s shielding of its population from the heat of the pandemic.

Earlier in October, the Central Bank of Kenya (CBK) for instance allowed commercial banks to list loan defaulters on credit referencing bureaus (CRBs).

The reserve bank is currently considering the stay or lapse of free mobile money transfers below Ksh.1000 ahead of the December 31 deadline.