House committee approves KQ tax-free send-off appeal
A parliamentary committee has asked lawmakers to approve a request by National Treasury Cabinet Secretary Ukur Yatani seeking to exempt from income tax the send-off package of 187 employees of Kenya Airways who left the service between January and March this year.
In a report tabled in the House by Tharaka MP George Murugara, the Committee on Delegated Legislation chaired by Tiaty MP William Kamket sought for the adoption of the report to have the employees given the send-off package.
If the move by the committee is adopted by the House, the employees will not pay income tax on the send-off package that they will benefit from.
“That this house adopts the report on the committee on delegated legislation on its consideration of the income tax exemption on the send-off package payable to employees of Kenya Airways Plc legal notice number 115 of 2021 and pursuant to the provision adopts the report,” said Murugara.
Decision of the committee comes after Yatani in his request to MPs, said that the tax exemption will facilitate the cash-strapped Kenya Airways Ltd to reduce the cost of sustaining redundant staff following reduced business due to the effects of Covid 19 pandemic and other factors.
“The Legal Notice seeks to exempt from income tax the send-off package, which is salary paid in lieu of notice, severance pay and pay for accumulated leave days paid to the 187 retrenched employees of Kenya airways Plc in accordance with the provisions of section 132(2) of the income tax act,” reads the legal notice submitted to the National Assembly.
Yatani also explained that the exemption, which is coming during the Covid-19 pandemic, will encourage more staff to take part in the voluntary retrenchment which is part of a turnaround program the airline adopted since 2019 to be able to rescue the sector from collapsing by reducing the cost of operations.
Cost of operations
The turnaround programme, which included rationalisation of staff to reduce cost of operations as the company was making losses, started after the board approved its implementation in 2016.
According to him, due to the impact of Covid-19 on the aviation industry since 2020 where most of the international travels were suspended, fast-tracking of the rationalisation process became necessary in order to save the airline.
“Considering that the retrenchment is voluntary, the tax exemption and especially during the Covid-19 pandemic will encourage staff to take the offer and also provide reasonable income to start some activities to sustain themselves,” said Yatani.
While defending his decision, Yatani said the move is necessary because it is the representatives of the affected staff who requested for an improvement of the send-off package that was agreed through the Collective Bargaining Agreement (CBA) and this is one of the ways to help improve the send of package.
“Kenya Airways Plc has been reporting losses for a long period and now the situation is worse, this has led to the retrenchment of some staff under a turnaround program to sustain the airline...
In view of the above Kenya Airways PLC sought the intervention of the National Treasury to exempt the staff from income tax on the send of package as one of the ways to improve the send-off package,” adds the legal notice.