Uhuru offers tax breaks to cushion Kenyans, traders

President Uhuru Kenyatta on Wednesday unveiled double-edged measures giving the economy, businesses and consumers various percentages of tax relief.

At the same time, he took away the freedom to move at night with an indefinite 7pm to 5am curfew.

In his first economic stimulus package to shield the economy from the effects of the coronavirus pandemic, the president ordered the National Treasury to give employees earning less than Sh24,000 a 100 per cent tax relief.

This means that if you earn Sh24,000 and less, you will get your full salary without the Pay As You Earn (Paye) deductions from April 1.

Those earning more than this will pay a maximum of 25 per cent down from the current 30 per cent.

PAY CUTS

In a presidential address on state interventions to cushion Kenyans against economic effects of the Covid-19 pandemic, he also announced pay cuts for the Executive.

He said his deputy William Ruto and himself would take 80 per cent pay cuts, the highest reductions.

Tracking coronavirus

Cabinet secretaries and chief administrative secretaries will take 30 per cent cuts, while principal secretaries will have their salaries reduced by 20 per cent.

He asked other arms of government to consider making similar voluntary reductions in a bid to free up monies to combat this pandemic.

Companies also have something to smile about after he cut corporation tax from 30 to 25 per cent.

CASH TRANSFERS

For the micro, small and medium enterprises (MSMEs), he has proposed a reduction of the controversial Turnover Tax (ToT), also known as the patriotism tax, from the current three per cent to one per cent.

This means that small businesses will now pay one shilling for every Sh100 they make in gross sales.

He also asked the National Treasury to give the elderly, orphans and other vulnerable members of our society an additional Sh10 billion through cash transfers to cushion them some more.

Distressed business enterprises and individuals will now not have to worry about being listed with Credit Reference Bureaus (CRB), after the President announced a temporary suspension of listing of any person, MSME and corporate entity whose loan account falls overdue or is in arrears, with effect from April 1.

He also ordered the National Treasury to cause immediate reduction of the VAT from 16 per cent to 14 per cent, from April 1.

The measures, however, will have little impact on those people who will find themselves out of a job, as well as the flower, aviation and tourism sectors that will bear the biggest brunt of the lockdown.

HEALTH WORKERS

All ministries and departments have also been ordered to pay at least of Sh13 billion of the verified pending bills in the next three weeks.

President Kenyatta also urged companies in the private sector to also pay their suppliers in three weeks.

He also asked the Kenya Revenue Authority (KRA) to expedite payment of all verified VAT refund claims amounting to Sh10 billion within three weeks.

Alternatively, the taxman should allow for offsetting of Withholding VAT in order to improve cash flows for businesses.

The president also directed that Sh1 billion be withdrawn from the Universal Health Coverage to recruit additional health workers to support in the management of the spread of Covid-19.

It is not clear how many will be hired and in what cadres. “I further direct the Ministry of Health, the County Governments and the Public Service Commission to expedite the recruitment process,” he said.

He also ordered all state and public officers with pre-existing medical conditions and/or aged 58 years and above, serving in Job Group S and below or their equivalents to take leave or work from home.

This directive, however, will now apply to personnel in the security sector and other essential services.

GLIMMER OF HOPE

The measures will be complemented by those taken by the Central Bank of Kenya (CBK) that include the reduction of the price of loans by one percentage point as well as freeing up Sh35.2 billion to support distressed companies.

“The Central Bank of Kenya shall provide flexibility to banks with regard to requirements for loan classification and provisioning for loans that were performing as at March 2, and whose repayment period was extended or were restructured due to the pandemic,” he said.

He also reorganised the ordinary calendar of Cabinet, its committees and key State Agencies so as to apply a ‘whole-of-government approach to the Covid-19 pandemic, and to foster enhanced responses to the same’.

It has been 13 days since Kenya confirmed the first case of Coronavirus within its borders. Yesterday, more cases were confirmed, bringing the total number of cases to 28.

“I am pleased to announce that numerous other suspected cases have been found to be negative after rigorous testing,” Mr Kenyatta said.

He also announced Kenya’s first recovery of a patient. “This is a clear indication that we can and we will beat the virus. We are and we will remain ahead of the curve,” he said.

SELF-QUARANTINE

But the most painful measures will come for Kenyans who like to be outside their homes after 7pm.

The president said that to honour the hard work and sacrifice of health workers in the frontline, the country must reduce movement and congregating in large groups.

Only persons offering essential services, among them medical professionals, health workers, media and critical and essential service providers will be spared.

President Kenyatta noted that the country recently experienced cases where transmission was from political and religious leaders who unfortunately did not heed the guidance by the Ministry of Health on self-quarantine and social-distancing.

“Our nation has always overcome and emerged from seemingly insurmountable challenges stronger and better,” the president said.

He added that defeating the pandemic demands cooperation, collaboration and common action.