Employers call for PAYE, VAT relief to cushion workers and firms

Jacqueline Mugo
Federation of Kenya employers (FKE) CEO Jacqueline Mugo (right) flanked by Labour CS Simon Chelugui addressing the media at NSSF building in Nairobi on March 23, 2020 on Covid 19. PHOTO | LUCY WANJIRU | NMG 

The Federation of Kenyan Employers (FKE) has called for the reduction of the Pay-as-You-Earn (PAYE) tax to cushion workers against salary cuts in the wake of the Covid-19 pandemic that has disrupted economic activities.

FKE chief executive Jacqueline Mugo Monday said that the tax relief will help workers foot the cost of basic goods that is likely to go up on reduced supply as the virus takes its toll on local manufacturing and major import economies.

While the lobby group did not state the size of the cut it wish es to see, Ms Mugo said that this should form part of the tough measures that the government should consider as production and profits dip.

Most firms have since last week asked staff to work from home or cut salaries while others have temporarily shut down and are now struggling with reduced cash flow.

“We are looking at statutory deductions and contributions and considering if they could be scaled down or withheld, areas like PAYE where employees are taxed. We have made proposals to the government to review and perhaps delay them,” Ms Mugo said.


Ms Mugo added that the state should also waive Value Added Tax (VAT) on local manufacturers to make goods cheaper besides withholding statutory deductions like NSSF to ease the pressure on firms already grappling with dips in their productivity and revenues.

The lobby further called on the State to create a special fund that will provide financing to local firms and ensure they continue operating in the wake of the coronavirus outbreak.

This comes after President Uhuru Kenyatta said that the State will take undisclosed fiscal measures to cushion millions of Kenyan workers and businesses from the economic slowdown triggered by the outbreak.

“In a few days, we will hold a meeting with the private sector where will announce a raft of measures to support them,” Mr Kenyatta said Monday.

Experts have said that the State should take measures that give short-term relief to businesses and individuals, including removal of tax on essential items and delayed payment of taxes.

The Central Bank of Kenya last week struck a deal with commercial banks to introduce new measures to cushion individuals and businesses that find themselves in financial distress as a result of the g coronavirus.

Under the deal announced at a meeting with President Uhuru Kenyatta last Wednesday, the financial institutions are expected to restructure their loans with customers in cases where borrowers are not able to honour their obligations on time.

The banks will also consider rescheduling loan payments by up to one year.