Money Management

Business lobby calls for new stimulus, tax cuts

Economy

Business lobby calls for new stimulus, tax cuts


KNCCI President Richard Ngatia. PHOTO FILE | NMG

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Summary

  • Kenya’s main business lobby on Wednesday called on the state to unveil an emergency stimulus package and tax cuts to cushion the economy.
  • The Kenya National Chamber of Commerce and Industry (KNCCI) has called for emergency relief measures for the most affected industries,

Kenya’s main business lobby on Wednesday called on the state to unveil an emergency stimulus package and tax cuts to protect the economy from the new lockdown following a spike in Covid-19 cases .

The Kenya National Chamber of Commerce and Industry (KNCCI) has called for emergency relief measures for the sectors most affected, such as the entertainment, hospitality and transport sectors.

The business lobby is pushing for a reduction in fuel taxes, lowering the value-added tax (VAT) rate to 14 percent from 16 percent and removing the minimum tax, which requires loss-making companies to pay a fee equivalent to one percent of their sales.

KNCCI wants the Central Bank of Kenya to re-allow lenders to restructure borrower loans following the latest corona restrictions.

Kenya last Friday introduced a wave of new restrictions, which restricted movement in five counties including Nairobi, a stricter curfew and the closure of bars as Covid-19 infections reached record levels.

The restrictions raised fears of a second wave of job losses and pay cuts across all sectors in an economy that entered a recession in the third quarter of last year at the height of the Covid-19 crisis.

“The high taxes in force should be revised and the minimum tax should be abolished,” KNCCI President Richard Ngatia said yesterday after a meeting of the chamber’s supreme body.

“Businesses need intervention in order to progress.

Ngatia said there was a need to expand emergency loan restructuring measures by financial institutions to further amortize small businesses.

The CBK said last Tuesday that March 2 marks the end of the period for banks to restructure loans for borrowers affected by the Covid-19 pandemic.

Policymakers unveiled the initiative to help struggling borrowers in March last year at the onset of the coronavirus crisis, helping to partly cushion the economy from the shock of the impact of the pandemic.

Borrowers who still have restructured loans outstanding will have until June 3 to regularize them, paving the way for a blacklist of defaulters with credit reference bureaus starting in September.

Kenya ended in January tax cuts put in place in April to cushion the economy from the impact of the Covid-19 pandemic and help close income gaps.

KNCCI says higher taxes would hamper recovery.

“Reduce VAT to 14 percent and reduce the cost of fuel,” Ngatia said.

The reduction in fuel taxes will help contain growing public anger and pressure over soaring fuel costs in the country.

Gasoline is currently retailing at a level last seen in November 2011, while diesel is selling at its highest level since December 2018.

Nairobi motorists pay Sh122.81 per liter of super gasoline from Sh115.18, which is an increase of Sh7.63, and Sh5.75 more for a liter of diesel to Sh107.66 Sh.

The taxes and levies represent 57.33 shillings for each liter of super gasoline, and 45.47 shillings and 39.55 shillings per liter of diesel and kerosene respectively.

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