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HomeKenya NewsWhy Coronovirus is a saviour to the public coffers

Why Coronovirus is a saviour to the public coffers


By Arden Makale

 Covid-19, a novel Corona virus strain, affects the respiratory functionality of a human being. The contagious virus broke out in Wuhan China in December last year.Covid-19 has spread all over the World, a situation that compelled the World Health Organization (WHO) to declare the virus as a pandemic.

 The declaration meant that countries had to re-adjust on their ways of doing business since the nations are inter-depended. Albeit Kenya Exports Tea, Horticulture etcetera she imports commodities such as Rice, Sugar, Maize etcetera. Though the pandemic prevails across the world, the Balance of trade has been maintained on a flat line so far since most countries are only engaging in exchange of products and services that go directly to managing the Covid-19 pandemic.

  This catastrophe has been an eye opener to various countries, for example, Ugandan President Yoweri Museveni admitted that this pandemic is a wake-up call to African countries and suggested that African Nations should invest in their manufacturing sectors to avoid shortages into the future in-cases of such lock-down decisions by various importing countries. Uganda imports of Seven (7) Billion US Dollar from China has been crippled by this pandemic.

Mr Makale is a Finance and Tax Expert at Makenmutua and Associate

 Kenya being a developing economy, would better re-adjust her thinking on imports and take deliberate measures to see that local manufacturing and services industry are revamped. In the 1980s and 1990s, Kenya made a lot of local manufacturing and imports were majorly on raw materials to support the deficiency on the local available material. Acknowledging the efforts that President Uhuru Kenyatta to resuscitate some of the local manufacturers who made the Kenyan Brand admirable, I say to him it isn’t enough until it’s enough.

 It is in necessity that inventions are made. Covid-19 has come as a necessity that has demanded Kenya to rethink through on our economic strategy. The inventions in our case were due over a period of time, and have come to pass. These has been evident through the pronouncements of President Uhuru Kenyatta and Central Bank of Kenya (CBK) Governor Dr. Patrick Njoroge.

 Their combined raft of measures (inventions) announced as the government in the wake of this pandemic are deduced below:

“Creation of employment opportunities will arise since manufactures will want to meet the rising demand of cheap products and hence the government will collect more on VAT from the increased sales of VATable products and services in the economy, a win to the producer/seller and a win to the government”

 Proposed reduction of VAT rate of Tax from 16 per cent to 14 percent will see the prices of commodities’ go down since the transfer of tax burden to the consumers’ will be reduced. Manufacturers’ will also produce more since their cost of production has been reduced from the purchase of VATable raw materials.

 Creation of employment opportunities will arise since manufactures will want to meet the rising demand of cheap products and hence the government will collect more on VAT from the increased sales of VATable products and services in the economy, a win to the producer/seller and a win to the government.

 The 100 per cent PAYE tax holiday for those earning below Ksh24, 000) and reducing the highest Personal Taxable Income bracket rate from 30 per cent to 25 per cent will see an increase of Kenyans purchasing power. Kenyans will be able to buy more consumables, which they were not able to do before.

 There will be a reduction in the country’s inflation rate due to price cuts that have been necessitated by economies of scale hence strengthening the Kenya Shilling as well as an increased consumption appetite in Kenya’s economy due to availability of the extra money in Kenyans pockets for consumptions.

 Reduction of Turnover Tax from 3 per cent to 1 per cent will encourage the small-scale traders to pay taxes. This rate is almost insignificant to be realized by the traders. Temporary Suspension of Listing in CRBs will also see those who were to be listed get a lifeline since some who utilize aggressive/short term borrowing facilities would have been crippled.

 Taking Voluntary pay cuts by the presidency and Executive will set a president of goodwill and therefore other arms of government will be obliged rather than compelled to follow suit. This will reduce the budgets on salaries, a recurring expenditure and hence channel the difference to a development Vote Head.

 By reduction of tax burdens to employers, the government has enabled them to create additional employment opportunities, which they could not afford because of the tax pinch.

 With this raft of measures Kenyans economy will be on a recovery trajectory into posterity. The president would have left a legacy that will be praised beyond himself. Kenyans would carry their flag with majesty.

 However, these raft of measures be maintained beyond Covid-19 so as to see those industries that are not currently benefiting from these Tax Breaks due to shutdowns by various countries also benefit once the pandemic is normalized. The industries include Tourism, Aviation, Hospitality, Construction, EPZs etcetera. These sectors might be forced to lay-off in case they don’t get to benefit from this Tax Breaks.

 Waive on non-filers penalties for people working from home who might not be internet accessible because of either lack of resources to afford the internet or unavailability of service provides. This is in exception of areas that the Telkom-Google-Loon internet balloons will be available. Subsidies rent from the tenants’ point of collection this would enable the government know all the Landlords.


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