Nairobi — Starting mid next week, Kenyans will start paying less for key commodities after the government gazetted the reduction of Value Added Tax to 14 percent Value Added Tax, down from 16 percent.
The legal notice sent by Treasury Cabinet Secretary Ukur Yatani is cited in the Value Added Tax (Amendment of the Rate of tax) order 2020 and follows a directive by President Uhuru Kenyatta.
On Wednesday, Kenyatta reduced the tax rate to ease the pain on households facing lower pay and lack of jobs in the wake of the coronavirus pandemic.
With the reductions, Kenyans should expect to pay less for electricity, cooking gas, detergents, and processed foods among others.
Processed foods include maize flour, rice, and cooking oil. Raw foods are however exempted from the tax.
"I recognize the anxiety that this pandemic has caused millions of Kenyan families; fearful of what the future may hold for them and their children. And the possibility of job losses and loss of income weighing heavily on their minds," Kenyatta said.
Could the reductions bleed an already ravaged economy?
The tax cut comes barely two months after the Kenya Revenue Authority reported to have missed its target in the first six months of the 2019/2020 financial year.
The taxman netted Sh857.8 billion, missing its target by Sh88.3 billion.
Of the netted amount, Value Added Tax collected was Sh211.5 billion.
Analysts have agreed that while the reductions are welcomed by the general public, the economy might be headed for a nose-dive.
Before the pandemic made landfall in the country, the economy was already on shaky ground owing to, among others, foreign and domestic debt obligations and development projects that have strained its coffers.