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During the sitting, the MPs will consider the economic stimulus interventions that the president announced to address the Covid-19 pandemic.

Additional vat

The Treasury is seeking to introduce the additional petrol tax in the current environment where crude oil prices have hit 18-year lows, helping to soften the impact of additional VAT charges.

The planned tax hikes are designed to fund a range of government development goals in an environment where the State has cut a number of taxes to boost businesses’ cash flow and workers’ disposable income amid the coronavirus pandemic.

Treasury cut VAT to 14 from 16 percent and corporation tax will be reduced to 25 from 30 percent under plans scheduled to come into force this month once approved by Parliament.

Workers earning less than Sh24,000 will be excluded from paying taxes while the minimum income tax rate, known as pay-as-you-earn (PAYE) has been reduced from 30 to 25 percent.

Kenya has confirmed 158 cases of coronavirus and sought aid from the International Monetary Fund (IMF) and the World Bank as economic sectors such as tourism and exports take a hit.

As a result of the global pandemic, the Central Bank of Kenya cut its 2020 economic growth forecast to 3.4 percent from its initial 6.2 percent as the outbreak saps demand from trading partners such as Europe, and disrupts tourism, supply chains and domestic production.

The Parliamentary Budget Office (BPO) — a unit which advises lawmakers on fina

ncial, budgetary and economic matters — estimates the reduced income and VAT measures will cost the Exchequer nearly Sh122.26 billion. Tax reliefs for earnings of up to Sh24,000 will cut government revenue by another Sh19.84 billion, while a drop in payroll taxes will cut PAYE by Sh7.08 billion.

Similarly, the reduction in corporate tax will deny the Exchequer some Sh45.69 billion.

The biggest revenue loss will, however, come from reduced general VAT levy from to 14 from 16 percent whose cost the BPO has put at Sh49.60 billion. The proposed drop in monthly turnover tax is likely to leave a Sh50 million revenue hole.
TAX RATE

A paper on measures taken or proposals to address the pandemic and related emergency will also be tabled.

National Treasury Cabinet Secretary Ukur Yatani published a gazette notice reducing the Value Added Tax (VAT) from 16 per cent to 14 per cent.

The law permits the CS to amend the tax rate by increasing or decreasing any of the rates by an amount not exceeding 25 per cent of the rate.

Two weeks ago, President Kenyatta announced a raft of measures to cushion Kenyans from the effects of coronavirus.

They include VAT reduction from 16 per cent to 14 per cent, cutting corporate tax to 25 per cent from 30 per cent, and 100 per cent tax relief to persons earning Sh24,000 and below.

Ugunja MP Opiyo Wandayi, who also chairs the Public Accounts Committee, termed the measures well-thought-out and reassuring.

“The measures should be able to cushion the mwananchi against the adverse effects of coronavirus. Alongside this, I urge him to sustain the war against corruption in order to free more resources towards uninterrupted provision of social services,” he said.