EDITORIAL: Tax incentives will ease workers, company woes

President Uhuru Kenyatta’s move to reduce employees’ income tax and value-added tax (VAT) is laudable and will offer working families relief as they fight the economic impact of coronavirus pandemic.

Parliament should now move with speed to approve the raft of measures that the President proposed to cushion workers and companies from the negative effects of the viral disease on the economy.

The President announced a 100 percent tax relief for Kenyans earning a salary of up to Sh24,000 in a move that will offer workers in that band an additional disposable income of between Sh1,000 and Sh1,400.

He also lowered the maximum income tax rate to 25 from 30 percent, which applies to workers earning more than Sh47,000.

The government further cut VAT rate to 14 percent from 16, which will lower the cost of a variety of goods like electricity, sanitisers, detergents, newspapers, processed foods, phones, books, electronics, computer hardware and software.

The new tax cuts will create an additional income of Sh4,241 monthly for those earnings Sh50,000 and Sh7,229 for workers on Sh100,000.

It will also create an additional disposable income of Sh9,717 for those earning Sh150,000 and Sh27,229 for employees earning more than Sh500,000 a month.

If implemented, they will lower the cost of basic items while providing workers with additional income to boost consumption.

This will in turn increase sales for traders, retailers and other outlets.

There is a need for the government to clarify the period that the new tax rules will be in place to help traders and workers plan.

An economy that was already limping is on track to grow at a slower rate. Most businesses are likely to record decline and might need the tax relief well after the pandemic.

Reverting to the old tax rate immediately after the pandemic will not give Kenyans sufficient time to recover from the deadly impact of the virus, which has ravaged the global economy.

Therefore, the cuts on taxes as proposed by the President should be in place during the war against Covid-19 and some months after the pandemic to cushion Kenyans from the post-outbreak effect.