ECONOMIC SUPPORT

Manufacturers wanted VAT at 8%, lending rates slashed

KAM had requested the Central Bank Rate be reduced to five per cent.

In Summary

•Kenya Association of Manufacturers had also asked for a reduction of Corporation Tax from 30 per cent to 15 per cent for the next six months.

•President Uhuru Kenyatta however last Wednesday directed VAT be reduced to 14 per cent from 16 per cent effective April 1, 2020.

Products displayed at a supermarket. Photo/FILE
Products displayed at a supermarket. Photo/FILE

Manufacturers sought to have the Value Added Tax reduced to eight per cent to cushion industries and public from high costs of goods arising from the impact of the coronavirus on the economy.

As the new tax measures come into place today,they also hoped the government would set aside a Sh22 billion one-off budget to clear VAT refunds. 

A Kenya Association of Manufacturers (KAM) proposal, seen by the Star, further wanted the government to direct ministries, departments, agencies, and county governments to pay all suppliers fully, starting with SMEs before paying large corporates and multinationals until the virus is under control.

 

The association had further sought for a reduction of the Corporation Tax from 30 per cent to 15 per cent and TurnoverTax cut from three per cent to one per cent, for the next six months.

“The association requested that the Central Bank Rate be reduced from the current 8.25 per cent to five per cent to benefit struggling lenders especially the SMEs,” chairman Sachen Gudka said in a statement to members on Covid-19.

According to Gudka, commercial banks would then go ahead to reduce their lending rates with equal margins.

KAM also wanted a six-month moratorium for Non-Performing Loans saying foreseeable negative effects of COVID19 may increase the ratio of gross non-performing loans to gross loans, with bad loans currently standing at Sh330 billion.

It also proposed expansion of salary bands, with the minimum taxable salary income increased from Sh 11,587 to Sh25,000. 

“We must do our utmost to ensure that there are at best no, and at worst, minimal job losses. We must dedicate our resources to supporting as many livelihoods as possible to cushion all citizens,” Gudka said on mitigating through the coronavirus shocks.

President Uhuru Kenyatta last Wednesday directed VAT be reduced to 14 per cent from 16 per cent, Corporation Tax will go down from 30 per cent to 25 per cent. The turnover tax rate was reduced from three per cent to one per cent, falling within the wish of manufacturers.

 

The President directed that all ministries and departments pay at least Sh13 billion of the verified pending bills, within three weeks.

He also exempted those earning below Sh24,000 from paying income tax and suspended the listing of loan defaulters by Credit Reference Bureaus.