Members of Parliament (MPs) will this morning convene in a special sitting to consider a bill that if passed, it will reverse tax cuts introduced to cushion Kenyans from the adverse economic effects of COVISD-19.
It will be a busy day for the MPs, who will discuss the Tax Laws (Amendment) Bill, 2020, right from the first reading to the last stage of law making process.
If passed, the Bill sponsored by Finance and National Planning Committee Chairperson Gladys Wanga will reverse income tax rate (Pay as You Earn- PAYE) from the current 25% to 30%. It will also reverse Value Added Tax (VAT) to 16% from the current 14%.
“The principal object of the Bill is to amend the Third Schedule to the Income Tax Act, Cap. 470 to reverse income taxes, specifically Pay As You Earn and Corporation Tax to the rates that existed before the enactment of the Tax Laws (Amendment) Bill, 2020 (pre-COVID),” reads the Bill.
This comes after the National Treasury announced plans to end the tax cut effective 1st January 2021, despite Kenyans still grappling with the effects of the pandemic.
Wanga, who is the Homa Bay Woman Representative, said that the need to revert back to old tax rates was informed by the falling revenue and government’s need to finance projects and services.
Also, Wanga says that plans to revert back to the old rates had been informed by the lifting of restrictions that were placed by the government to curb the spread of COVID-19 in the country.
“The pandemic is still on but the restrictions have been eased. At the same time, we have been able to evaluate the impact of some of the reliefs like the reduction on the VAT; there has not been trickle-down effect to the common mwananchi,” said Wanga.