Companies and workers in three countries of the East African Community receive relief following a decision to lower VAT and tax on Pay As You Earn (Paye).
Kenya, Uganda and Tanzania decided in their budget statements for 2020/2021 to lower VAT and exclude lower categories of employees from Paye to protect them against the impact of the Covid-19 steps that were implemented in March.
Rwanda, South Sudan and Burundi have their budgets yet to be read.
The VAT refund payments will improve liquidity and cash flows for the pandemic-stricken businesses in the region.
Kenya reduced its VAT from 16% to 14% as suggested by the Eastern African Business Council (EABC), which also called for reimbursement of VAT to companies in order to improve company financing.
“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.
“The budgets for Kenya, Uganda and Tanzania have incorporated our proposals that will go a long way in stimulating local consumption of goods and services as well as cushion consumers during the period of Covid-19.”
Kenya, which had already lowered the corporate and personal relief tax rates stated that, “We reduced tax rates for both corporate and personal income (Paye) from 30 per cent to 25 per cent and provided 100 per cent tax relief for persons earning a gross monthly income of up to Ksh24,000 ($225 dollars),” said Treasury Cabinet Secretary Ukur Yatani.
