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Accountants Body Proposes Economic Support Scheme To Contain COVID-19

by biasharadigest

Kenya has maintained a stable and consistent economic growth for the past six years. The Budget policy statement 2020 had projected the economy to expand to 6.1% up from 5.6% in 2019. This is however unlikely to happen given the economic impact of Covid-19 both in the local setting and as well as globally. Global economic growth was projected at 1.3% in 2020.

According to a policy brief by The Institute of Certified Public Accountants (ICPAK), Covid-19 could have a huge impact on the country’s economy which could see a plunge in key sectors of the economy such as manufacturing, tourism, hospitality, horticulture and diaspora remittances. The country is likely to experience worsened liquidity challenges, loss of tax revenue, a slowdown in government expenditure, low production and lower business investment due to lower expenditure by consumers. The pandemic could also lead to eventual closure of companies as social distancing continues to be enforced.

The Institute of Certified Public Accountants proposed a couple of tax concession measures to cushion Kenyan businesses from the negative economic impact of covid-19 including:

  • Deferment of Corporate return balance tax due 30th April to 30th July subject to containment of the pandemic.
  • Pay As You Earn(PAYE) to be due and payable on actual salaries and not accrued salaries.
  • Extension on date of filing of tax returns by 3 months to 30th September.
  • Extension of Final tax balances payment by 3 months to 30th September
  • Payment of first and second tax instalments to be deferred to 20th July and 20th October depending on the businesses’ accounting period
  • Payroll rebates in cases where employees must take unpaid leave, with consideration to waive off 50% of PAYE due

The Kenyan Government has recently instituted measures meant to offer relief to SMEs, Corporations, and households due to the economic impact of COVID-19. Tax measures include:

  • 100 % Tax Relief for persons earning gross monthly income of up to Ksh. 24,000
  • Reduction of Income Tax Rate (Pay-As-You-Earn) from 30% to 25%
  • Reduction of Resident Income Tax (Corporation Tax) from 30% to 25%
  • Reduction of the turnover tax rate from the current 3% to 1% for all Micro, Small and Medium Enterprises (MSMEs)

The policy brief also suggests that the balance of Ksh. 18.34 Billion pending bills due by counties and Ksh. 370 Million owed by Ministries, Departments and Agencies of the National Government be settled immediately. The money is owed to MSMEs and could help improve liquidity in the economy.

ICPAK proposes that the counties and National government to immediately review and revise downwards their overall budget estimates for the Financial Year 19/20 to free up unspent cash while budget estimates for the Financial year 20/21 to be reviewed taking into consideration reduced revenue collection.

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