Among the state directives issued by President Uhuru Kenyatta to cushion Kenyans from the adverse effect of the COVID-19was tax cut and reliefs. But the government might be forced to recall that decision as the International Monetary Fund (IMF) is pushing for higher taxes. This comes days after IMF gave Kenya Ksh78.3 billion in emergency financing to help it respond to the economic shock caused by Covid-19.
The financier argues the tax changes will cost the Kenya Revenue Authority (KRA) and sabotage the State’s ability to deal with emergencies and spending on development projects like roads, power plants and water infrastructure. Already, the government’s ability to deal with unforeseen spending has been weakened as civil servants’ salaries, debt payments and allocation to counties already consume 94 per cent of government revenue.
“Going forward, to support the revenue effort over the medium term, staff recommends that the tax rate reductions for the VAT, turnover tax, and personal income tax be reversed once the crisis has passed,” wrote IMF in an assessment of Kenya’s economy.
According to Treasury CS Ukur Yatani and CBK governor Partick Njoroge, the state is closely monitoring the economic impact of COVID-19 and that once economic activity recovers sufficiently, the government will review its tax measures to fully restore revenues as a share of GDP as part of the efforts to strengthen the public finances.
The tax relief and cuts have been a relief to Kenyans who have been struggling financially to make both ends meet in this COVID-19 pandemic, as many of their sources of income have been shut down.
