New Pension Bands: KRA Puts The Squeeze on Retirees as Tax Holiday Ends

Senior citizens will have a tough year ahead after the Kenya Revenue Authority (KRA) yesterday published new pension bands following the lapse of tax reliefs to ease the impact of Covid-19.

Unlike workers who will pay less pay-as-you-earn (PAYE) than in the pre-Covid period, pensioners’ tax bands have reverted to the old rates, a situation that will see retirees struggle through a tough economic environment.

The new tax rates announced in a public notice took effect yesterday January 1, 2021.

“The Kenya Revenue Authority informs the public of the changes of tax rates introduced through the Tax Laws (Amendment) Act No 2 of 2020 published on 24th December 2020 and legal Notice No 206 of 2020 of employment income, corporation tax and valued added tax,” read part of the notice.

“The new rates replace the rates introduced in April 2020 to provide relief to Kenyans following the impact on businesses and employment income occasioned by the Covid-19 pandemic.”

On December 22, members of the National Assembly voted for the reversal of Covid-19 tax reliefs in an attempt to fill empty government coffers.

But given the dire economic situation, it is not only the government that is desperate to recover from the havoc wrought on an already strained economy when coronavirus struck in March.

Businesses and households have been hit hard by the pandemic, dimming any hope for a meaningful improvement in revenue collection.

The country is in the grip of a health crisis, with doctors, nurses and clinicians downing their tools over a myriad of grievances, including the push for better pay and provision of personal protective equipment (PPE).

A number of businesses have shut down, millions have lost their jobs, while many others are on pay cuts.

The reversion of VAT to the standard 16 per cent means that a lot of distressed parents will pay more for textbooks, exercise books, uniforms and other stationery.

This situation will be complicated by the new tax measures that come at a time when Kenyans are struggling to make ends meet.

The government, however, has sought to re-assure Kenyans that the new tax rates will be lower compared to the ones they paid in the pre-Covid-19 period.

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