Income tax, value-added tax and sales levy cuts announced by President Uhuru Kenyatta in the wake of the Covid-19 pandemic will be reversed if Kenya agrees with the International Monetary Fund (IMF) to reinstate the higher taxes.

International Monetary Fund

The fund says the cuts will cost the Kenya Revenue Authority (KRA) and compromise the State’s ability to deal with emergencies and spending on development projects like roads, power plants and water infrastructure.

The IMF has asked the Treasury to reverse its earlier stand of delinking the tax reliefs to the end of the coronavirus pandemic, meaning that Kenyan workers and companies will stop enjoying them after the spread of the virus has been contained.

The Treasury and the Central Bank of Kenya (CBK), in a response to the IMF, have committed to review Kenya’s tax measures without being specific, adding that the country will restore the lost revenues.

Kenya’s revenue collection is expected to drop by Sh43 billion in three months due to the cuts on Income tax, value-added tax and sales levy, the IMF warned after agreeing a Sh78.3 billion ($739 million) in emergency financing to help Kenya respond to the economic shock caused by Covid-19.

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