Editor's Review

  • The tax rates were cut amid the Covid-19 pandemic. 
  • Kenyans should expect a rise in basic commodities. 

The National Treasury is set to reinstate old tax rates on PAYE and VAT from  January 1.

The reinstating has been announced by Treasury CS Ukur Yattani after the annual government revenues dropped by Sh65 billion amid the coronavirus pandemic.

The government imposed the tax cuts to cushion Kenyans and the economy against the economic effects of the pandemic.

According to Ukur, the monthly Pay-As-You-Earn (Paye) deducted from salaried employees will revert to 30 per cent from 25 per cent in January.

The government is also expected to revert Value Added Tax (VAT) to 16 per cent from current 14 per cent, meaning the prices of fuel, food, drugs and other essential commodities will shoot up.

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In June, Yattani stated that the government was to continue cushioning Kenyans against the prevailing economic times. 

“The government will continue to review the prevailing economic situation and institute measures that ensure we protect lives and livelihoods while upholding a stable macroeconomic environment,” the CS said.

An increase in taxes comes with a rise in the cost of basic goods and services, meaning disposable incomes will fall. Also to be scrapped is the provision that saw those earning less than 24,000 exempted from taxes.