Kenya’s top business lobby Wednesday called on the State to unveil an emergency stimulus package and tax cuts to cushion the economy from the new lockdown following a spike in Covid-19 cases.
The Kenya National Chamber of Commerce and Industry (KNCCI) petitioned for emergency relief measures for the worst-hit industries, such as the entertainment, hospitality, and transportation sectors. The business lobby is pushing for a reduction of fuel taxes, lowering the value-added tax (VAT) rate would to 14 per cent from 16 per cent and eliminating the minimum tax, which demands loss-making firms to pay a duty equivalent to one per cent of their sales.
The KNCCI wants the Central Bank of Kenya to allow lenders once again to restructure loans for borrowers in the wake of the latest corona restrictions. Kenya last Friday introduced a wave of new curbs, which restricted travel in five counties including Nairobi, a stricter curfew and the closure of bars as Covid-19 infections hit record levels.
The restrictions have raised fears of a second wave of job losses and pay cuts across sectors in an economy that dipped into recession in the thirds quarter of last year at the height of the Covid-19 crisis. “The prevailing high taxes should be revised, and the minimum tax should be abolished,” KNCCI president Richard Ngatia said yesterday after a meeting of the chamber’s top organ.
“The businesses require intervention to progress.”Mr Ngatia said there is a need for the extension of emergency loan restructuring measures by financial institutions to further cushion the small businesses.
The CBK last Tuesday said March 2 marked the end of the period for allowing banks to restructure loans for borrowers hit by the Covid-19 pandemic. Policy makers unveiled the initiative to help distressed borrowers in March last year at the onset of the coronavirus crisis, helping to partly cushion the economy reeling from the pandemic impact.
Borrowers who still have outstanding restructured loans will have until June 3 to regularize them, paving the way for blacklisting of defaulters with credit reference bureaus from September. Kenya in January ended tax cuts put in place in April to cushion the economy from the impact of the Covid-19 pandemic to help to plug revenue shortfalls. The KNCCI says the higher taxes would hamper a recovery. “Reduce VAT to 14 per cent and reduce the cost of fuel,” said Mr Ngatia.
Cut on fuel taxes will help contain growing public anger and pressure over soaring fuel costs in the country. Petrol will is currently retailing at a level last seen in November 2011 while diesel is selling at the highest level since December 2018.Motorists in Nairobi are paying Sh122.81 per litre of super petrol from Sh115.18, representing a Sh7.63 increase, and Sh5.75 more for a litre of diesel at Sh107.66.Taxes and levies account for Sh57.33 for every litre of super petrol, and Sh45.47 and Sh39.55 per litre of diesel and kerosene respectively.