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Kenya Plans VAT Cut, Biz Tax Break To Fight COVID-19

By Joseph Boris · March 25, 2020, 6:51 PM EDT

Kenya announced cuts to value-added and corporate income taxes Wednesday that the country’s president said would help shield one of Africa’s biggest economies from coronavirus harm.

In a televised address, President Uhuru Kenyatta said the country’s VAT rate would be reduced to 14% from 16% while the corporate income tax would be lowered to 25% from 30% under plans scheduled to take effect April 1.

In addition, there would be 100% tax relief for Kenyans who earn a monthly income of up to 24,000 Kenyan shillings ($226) to increase their disposable income, Kenyatta pledged.

Kenyatta, who has led the East African country of 53 million people since April 2013, said he recognized the anxiety the pandemic has caused millions of Kenyan families, including fears over lost jobs and income.

“My administration has made and will continue to make targeted state interventions to cushion every Kenyan from the shocks arising from this coronavirus,” the president said.

The other tax-related measures Kenyatta announced include reducing the rate of employer-collected payroll tax to 25% from the current 30% and lowering the turnover tax rate for all micro, small and medium-size enterprises to 1% from 3%.

On Monday, Treasury Secretary Ukur Yatani said the government planned to speed up tax refunds in the next two to three months to inject liquidity into the economy.

Nontax fiscal plans presented Wednesday included an additional 10 billion Kenyan shillings in direct cash transfers to the elderly, orphans and other vulnerable members of society, the president said. He also promised to temporarily suspend disclosures to credit reference bureaus about any individual or business with an overdue loan or that is in arrears.

As of Wednesday, Kenya had confirmed 28 cases of the COVID-19 disease the coronavirus causes, and the government said on Friday it would begin imposing a nighttime curfew to contain its spread. Kenyatta said the measure was taken after residents failed to heed advice to stay home and avoid public gatherings.

Earlier this week, Kenya’s central bank cut its 2020 economic growth forecast to 3.4% from an initial 6.2% as the pandemic drains trade partners’ demand for Kenyan farm exports and disrupts supply chains and domestic production. The bank’s governor, Patrick Njoroge, said the government was seeking emergency assistance of up to $350 million from the International Monetary Fund and $750 million from the World Bank.

--Editing by Vincent Sherry. 

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