KRA have heard the people's cry of rising cost of living due to the unbearable 18.9% inflation. The fact that borrowing has become expensive makes matters even worse. KRA have decided to review their tax brackets (last time this was done was in 2005) with the results released in July 2012. Their intention is to increase Kenyan's disposable incomes and potentially reduce the pressure on employers. I would like your views on this; is this a welcome solution? Why did it take too long to review the tax brackets? Frankly I am glad, just need to persevere for the next few months .

Deliberations are ongoing but the big picture is they want to make sure not too many people are caught up in the 30% tax bracket which has a floor of 38K therefore they want to increase the maximum non-taxed income to above the current 13K. I'm seriously crossing my fingers

I highly doubt this will be a one way bet unless Muigai has lost it completely. The right hand will give and the left hand will take...

VAT has been known to be the best way of collecting tax as it covers all irrespective of their income.

U r right on the money...

too little....too late, bearing in mind that the last review of tax brackets/personal relief was eons ago... the little benefit we will now obtain was 'consumed' long ago by inflation!

In my view what is required is a radical, perhaps even revolutionary rethinking on how and who we tax, how much and when.

Again in my view the PAYE thresh-hold should be raised to around Kshs. 40k per month, with one hitting the top rate at about 200k per month.

Top rate of personal tax should be capped at around 22% and corporate tax at around 25%.

This will put more money in our pockets (and those of corporates), which should then spur consumption, savings and employment. It will perhaps also discourage evasion, which has become a cottage industry in itself! Has the media not given us the perception that the offshore arrangements of CMC directors/managers is largely a tax evasion scheme?

VAT can then go up to say 20% - more efficient to collect and administer (and we really won't feel that much of a pinch as we have more money in our pockets).

It really beats me when trade unions (Atwoli et al) always seem to agitate for higher wages but never for lower taxes - when they would achieve the same thing for workers. Similarly, FKE wants wages kept down - but we're yet to hear them lobbying the government for lower personal and corporate taxes!

The job of government (among other things)would then be to ensure price stability (at least for the basics) and maintain the cost of living within reasonable parameters...

My two drachma...

@Elephant Man... but isn't the Govt doing everything possible to reduce the amount of Kenya Shillings we have in our hands via the increased CBR rates.. and consequently increased lending rates??? I don't think increased consumption is their goal right now (at least not in the short term)

Their short term goal is definitely not to increase consumption but to tame inflation as well as stabilie the shilling. The new tax brackets will be initialised in July 2012 thus ample time to review macroeconomic activities as the MPC meet monthly.

Good arguments @Elephant Man...

Only way govt can do that is spur investment locally...for that, you have to spend a bit more in the short term to achieve the long term goal

Raising the maximum taxable salary will not affect the middle class citizens like me and McReggae.
Now at 38K gross, the highest they could go is may be 50K.