President Uhuru Kenyatta yesterday introduced tax measures aimed at keeping the country’s economy afloat, as the effects of the coronavirus continue to dampen the macroeconomic environment.

The President directed the Treasury to move to Parliament to offer immediate relief and increase disposable income to Kenyans.

“My administration has made and will continue to make targeted state interventions to cushion every Kenyan from shocks arising from COVID-19,” Uhuru said in his national address.

Among the measures, he declared 100 per cent tax cut for workers earning Sh24,000 per month.

He also directed that income tax (Pay-As-You-Earn) and resident income tax (corporation tax) be slashed from the current 30 per cent to 25 per cent.

Small business owners whose annual earnings do not exceed Sh5 million will receive a reduction in turnover tax from the current three per cent to one per cent.

The President ordered the appropriation of Sh10 billion to the elderly, orphans and other vulnerable members of the society through cash-transfers by the Ministry of Labour and Social Protection.

This is aimed at cushioning the most vulnerable from adverse economic effects of the coronavirus pandemic.

Census data shows the population aged 65 years and above for Kenya was 2.4 per cent of the country’s 47.6 million.

The Treasury was also directed to reduce Value Added Tax from 16 per cent to 14 per cent.

Uhuru also announced the temporary suspension of listing with Credit Reference Bureaus for any individual or business whose loan accounts fall overdue or are in arrears, effective April 1. 

The President targeted ministries and state corporations in his speech, introducing austerity measures that would help increase cash flow in the market.

Ministries and state departments have been given three weeks to pay at least Sh13 billion of the verified pending bills.

“Similarlyand to improve liquidity in the economy and ensure businesses remain afloat by enhancing their cash flows, the private sector is also encouraged to clear all outstanding payments among themselveswithin three weeks from the date hereof,” Uhuru said.

The Kenya Revenue Authority was given a three-week timeline to expedite payment of VAT refund claims to the tune of Sh10 billion, or alternatively allow firms to offset their current Withholding VAT.

Additionally, the President announced pay cuts for a number of state workers.

He and his deputy will receive 80 per cent slash of their monthly pay.

Cabinet Secretaries and Chief Administrative Secretaries have been directed to take a 30 per cent pay cut while Principal Secretaries’ monthly pay was reduced by 20 per cent.

“I call on the other arms of the government and tiers of government to join us in this national endeavour, by making similar voluntary reductions; which will free up monies to combat this pandemic,” he said.