Business & Investment

Parliamentarians cut workers’ salaries and stop Covid tax cuts

Economy

Parliamentarians cut workers’ salaries and stop Covid tax cuts


Members of past sessions. File Photo | NMG

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Overview

  • Lawmakers passed a bill backed by the Treasury last night to confirm the tax cuts introduced as a result of Covid-19, which was abolished on January 1, against pressure from manufacturers, employers and business lobbies. ..
  • MP approved Tax Law (Amendment) (No 2) Bill 2020 in a special session calling for swift discussion and approval of the bill aimed at raising taxes.
  • The bill is currently waiting for President Uhuru Kenyatta’s signature to be enacted. This will reduce the net wages of workers in years when employers are unlikely to raise salaries to protect the income hit by the pandemic.

Workers, families and businesses are staring at a tough New Year after parliamentarians have resolved to end the income and value-added tax cuts imposed to mitigate Kenyans from the effects of the coronavirus crisis.

This will allow workers with monthly salaries of 50,000 shillings or more to cut net salaries and covid households and businesses after the Treasury has expanded the scope of income taxes to mitigate the impact of the withdrawal of relief measures introduced in April. Will relieve the financial shock of. 19 pandemic.

The cost of basic commodities such as detergents, cooking oil, electricity, airtime, and services such as pay-TV subscriptions will rise as higher VAT recovers, putting pressure on inflation.

Lawmakers passed a bill backed by the Treasury last night to confirm the tax cuts introduced as a result of Covid-19, which was abolished on January 1, against pressure from manufacturers, employers and business lobbies. ..

MP approved Tax Law (Amendment) (No 2) Bill 2020 in a special session calling for swift discussion and approval of the bill aimed at raising taxes.

The bill is currently waiting for President Uhuru Kenyatta’s signature to be enacted. This will reduce the net wages of workers in years when employers are unlikely to raise salaries to protect the income hit by the pandemic.

“This is a very big argument, paying taxes that existed before Covid-19 rather than taking the populist route that people should pay zero or tax cuts because the government has to provide services. We are standing here, “said the chairman of the Treasury and State Planning Commission.

“We approve these amendments to ensure that the government has enough income to service the project, pay scholarships and develop the school infrastructure to secure social distance. I call on you to go on a path that is not populist, “said Homabay Women’s Representative.

MP supported the position of the committee. The Treasury has warned of delays in payroll for civil servants and threatened to suspend significant private services amid the cash crisis caused by the financial difficulties of the coronavirus.

The tax collection for the first five months to November fell by 10.72 billion shillings to 527.7 billion shillings due to the coronavirus-related turmoil.

Passing the bill means that companies will pay 30% corporate tax instead of 25%, while VAT will return from 14% to 16%.

The personal income tax cap will be returned from the current 25% to 30%.

Small traders, such as salons and grocery stores, will also start paying taxes at a rate of 1% to 3% of total sales once Covid’s tax cuts are abolished.

Tax cuts were aimed at lowering the cost of basic items, while at the same time providing workers with additional income to drive consumption and boost retailers’ sales.

It is the first time in seven years that Kenya has reduced VAT after including more products in this tax category in 2013. Raw food is tax exempt.

After the state expands its income tax range, office workers earn up to £ 4,856 each month, which may not be enough to cover the higher taxes of those who earn more than £ 50,000.

Kenya is slowly recovering from the effects of the infectious disease, and profitable companies have suffered losses, leading to reduced employment and unpaid leave for retained staff.

Many institutions, including the Kenyan Manufacturers Association (KAM), the Kenyan Private Sector Alliance (Kepsa), the Kenyan Banking Association (KBA), and leading accounting firms PwC and KPMG, have petitioned MPs to extend tax cuts.

“You’re generating taxes that drive out all your businesses. We’re going to end the rest of the companies,” said Job Wanjohi of KAM, adding that adding a bill would kill “golden egg-laying geese.” It was.

“It is unreasonable and unacceptable to return to higher taxes as if Covid-19 ended three to six months ago,” said the Kenyan Consumers Union (Cofek).

The Treasury says the tax cuts introduced as a result of Covid were no longer sustainable due to persistent revenue shortages in the restrained economic activity that affected the implementation of government programs.

A decision was made to end tax cuts as Kenya succumbed to pressure from the International Monetary Fund (IMF) and was afraid to dispose of them to protect the country’s revenue targets.

The IMF urges the government to revive tax increases once the effects of Covid-19 are mitigated, reducing costs to the Kenyan Revenue Service (KRA) and the state’s ability to handle emergencies and spending on development projects. Said to hurt.

Parliamentarians cut workers’ salaries and stop Covid tax cuts

https://www.businessdailyafrica.com/bd/economy/mps-back-workers-salary-cut-halts-covid-tax-relief-3236784 Parliamentarians cut workers’ salaries and stop Covid tax cuts

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