This archive report was first published on 19 July 2020.
The Covid-19 pandemic has had a devastating impact on Kenya's economy, with the government's tax collection taking a significant hit. According to a new report by the National Treasury, the government expects to net Sh377 billion from employees in the formal sector, a reduction of Sh91 billion from the Sh468.5 billion target set at the beginning of the last financial year.
The reduction in tax collection is attributed to the government's decision to offer tax reliefs to businesses and employees to cushion them against the effects of the pandemic. Employees with a basic salary of Sh24,000 and below were spared Pay-As-You-Earn (PAYE) while those in the other income bands saw their maximum tax rate slashed from 30 per cent to 25 per cent.
Other sectors that have been hit hard by the pandemic include the hospitality industry, with high-end hotels struggling to recover. Entertainment joints such as nightclubs and pubs will also take long to recover as the government continues to implement social distancing rules.
Already, the Kenya Revenue Authority (KRA) has missed its tax collection target by Sh350 billion, collecting Sh1.43 trillion compared to the original target of Sh1.8 trillion in the 2019-20 financial year. The target had since been revised downwards, which means that the taxman had technically missed the target by Sh12 billion.
Published on July 19, 2020 by The Standard.
