This archive report was first published on 14 May 2020.
On May 6, 2020, the Finance Bill 2020 was tabled in the National Assembly for debate and approval, marking a departure from previous years where Finance Bills would be introduced after the national budget in June.
The Bill proposes to delete the paragraph exempting from tax income from employment paid in the form of bonuses, overtime, and retirement benefits to employees whose taxable employment income before bonus and overtime allowances does not exceed the lowest tax band provided under Head B of the Third Schedule.
According to KPMG, the audit firm, this amendment seeks to tax the bonuses, overtime, and retirement benefits which had initially been exempted through the Finance Act 2016. This will result in a reduction of disposable income for low-income earners.
Additionally, the Bill proposes to delete the paragraph exempting from tax pensions paid to persons who are sixty-five years of age and above. Should the proposal pass, retirees, many of whom fall within the category of vulnerable members of society, will receive lower pensions, reducing their disposable income.
KPMG urges the government to consider going slow on implementing the changes to cushion Kenyans who are emerging from the devastating effects of the coronavirus pandemic.
