Kenyans have been warned to brace themselves for times after Kenya Revenue Authority (KRA) confirmed that a plan was in the offing to introduce new tax brackets in January 2021.
KRA Head of Tax Compliance Nickson Odondi disclosed that the taxman was gearing to add the new brackets in the new year even as tax incentives given by President Uhuru Kenyatta are set to expire then.
The boss, according to People Daily, disclosed that the new tax plan was part of KRA's plans to boost its revenues after suffering a blow during the Covid-19 period.
In October, KRA recorded a 15% drop in tax collection for the first quarter of the 2020/2021 financial year (starting July 2020).
The shortfall amounted to Ksh317 billion while the non-tax collections over the same period, ending September 30, dropped to Ksh24 billion from Ksh66 billion.
At the time, the authority attributed the drop to tax breaks that were awarded by President Uhuru Kenyatta as part of measures to caution citizens from the Covid-19 pandemic's negative effects on the economy.
The new taxes are set to be introduced at the time when the tax breaks by the head of state are set to expire.
In his September speech, Uhuru directed the Treasury to retain tax breaks until January 1, 2021. The breaks included VAT which was retained at 14%, Income Tax Rate (Pay-As-You-Earn) at 25 percent and the Resident Income Tax (Corporation Tax) at 25%.
PricewaterhouseCoopers, however, observed that the country had, in recent months, seen many brackets of taxes revised upwards despite breaks issued by the President.
“Tax reduction of tax rates in April was welcomed by investors. However, some of the recent changes aimed at increasing revenue are inconsistent with Kenya’s economic blueprint,” stated PWC Kenya tax policy lead Edna Gitachu.
Over the past two months, the taxman had introduced a variety of taxes including the Minimum Tax which was expected to affect businesses whether they were making profits or not.
The rate of Minimum Tax is 1% of the gross turnover of the company.
Other taxes introduced included service tax on purchases made by debit cards as well as an adjustment on beer, wines and spirits charge.