Third Eye

Plan ahead to keep January blues at bay

Tuesday, December 8th, 2020 00:00 |
President Uhuru Kenyatta addresses the nation. Photo/PSCU

The National Treasury arrested any doubts that tax relief measures meant to cushion the country from Covid-19 shocks might be pushed forward.

The Treasury said effective January, 2021 it will reinstate government revenues lost after Covid-19 tax relief measures end.

The Cabinet Secretary Ukur Yatani returned corporate tax for residents with individual income tax (PAYE) to a higher 30 per cent from 25 per cent while value added tax (VAT) will return to 16 per cent from the current 14 per cent.

Fortunately, Kenyans earning a gross salary of up to Sh24,000 will continue enjoying government soft landing.

This even as questions abound whether these changes will have the desired effect on the economy given the recent increasing surge in infections.

Unknowingly, the country could be digging itself into further headwinds amid renewed economic disruptions as Covid-19 infections rise, exposing Kenya’s soft underbelly.

Granted, the country realised a spell of positive growth after the lockdowns and restrictions were eased, however, towards the end of November business activities  were muted worrying experts, particularly going into the festive season.

The Stanbic Bank Kenya monthly published Purchasing Managers Index (PMI) shows reduced orders for goods, implying lower revenues for enterprises during the festive season.

These, coupled with dampened optimism for growth over the year and reduced job creation for an economy, which has since lost more than 1.7 million jobs since March, points to an economy between a rock and a hard place.

On the one hand, it must regenerate its productive sector so as to harness taxes, on the other hand, it must collect enough taxes since its debt obligations might not allow it to gobble up debt to cushion itself.

The tax reversals are being implemented after President Uhuru Kenyatta signalled the end of part of tax relief measures in an address to the nation on September 29, but there is need to ask whether indeed it is the panacea for growth.

Coming at a time when Kenyans will be paying school fees, the reversal of the measures will deal a blow to personal income, and a major pain to the unemployed as pay cuts and job losses persist.

January is going to be a difficult month for both the government and Kenyans.

Everyone needs to come up with innovative ways of staying afloat. Plan ahead in December; do not celebrate now and mourn in future.

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