This archive report was first published on 16 June 2020.
As the COVID-19 pandemic continues to affect East Africa, three member countries of the East African Community (EAC) have taken steps to ease the tax burden on businesses and workers. In their 2020/2021 budget statements, Kenya, Uganda, and Tanzania agreed to lower the Value Added Tax (VAT) and exempt lower categories of workers from Pay As You Earn (Paye).
According to the EAC, the VAT refund payments will improve liquidity and cash flows for businesses in the region, which have been heavily affected by the pandemic. Kenya, for instance, lowered its VAT from 16 percent to 14 percent, as proposed by the East African Business Council (EABC). The EABC also called for VAT refunds to companies to enhance funding to businesses.
“The expectation of the private sector is that the EAC budgets for 2020/21 will contain economic stimulus packages that will mitigate the impact of the COVID-19 pandemic on businesses and citizens, and will stimulate economic growth and recovery,” said Peter Mathuki, the chief executive of the EABC.
Kenya, which had already reduced tax rates for both corporate and personal relief, further reduced tax rates for both corporate and personal income (Paye) from 30 percent to 25 percent. Additionally, the government provided 100 percent tax relief for persons earning a gross monthly income of up to Ksh24,000 ($225 dollars).
While Rwanda, South Sudan, and Burundi have yet to read their budgets, the move by Kenya, Uganda, and Tanzania is seen as a positive step towards mitigating the economic impact of COVID-19 in the region.
