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State should reduce taxes to help citizens

Banks have been asked to waive various levies charged on transactions and reschedule loans and debt payments. That is a good start.

However, we need bolder and impactful decisions to ease financial pressure on businesses and individuals.

Kenya Airways’s decision to impose a 75 per cent pay cut on employees is the first strongest signal of the devastation wrought by the coronavirus on businesses and economy. Kenya Airways is just but the first casualty as airlines have been the worst hit, with near total cancellation of all international flights. More companies face a similar harsh reality. Hotels and other hospitality-related businesses are on their knees as travel and bookings fall sharply. Soon, the entire business community will be caving in as the pandemic takes a toll on every sector of the economy.

Coronavirus is as much a medical threat as it is economic and social. It has challenged health systems and compelled governments to reallocate resources to fight its spread.

Governments elsewhere – US, Britain, Germany, among others – have introduced stimulus packages to cushion companies and citizens and mitigate against economic wreckages brought by the virus. The US government has earmarked some $ 1.5 billion stimulus package. The British government has undertaken to pay up to 80 per cent of workers’ salaries and defer value added tax payments. Germany has put in US$1.1 billion to support workers in the face of job losses. In all these, the objective is to protect jobs, guarantee continued productivity and enhance incomes. For the converse is true. Without bailouts, many companies are bound to ground to a halt, with severe consequences.

Kenya, like many countries in the global south, are beginning to feel the heat and there is a likelihood of things getting out of hand. Yet most of these countries are not sufficiently prepared to tackle such threats. They do not have the resources. Nonetheless, governments must find ways of cushioning citizens and businesses from collapse.

Last week, the Central Bank announced measures to help businesses. Banks have been asked to waive various levies charged on transactions and reschedule loans and debt payments. That is a good start.

However, we need bolder and impactful decisions to ease financial pressure on businesses and individuals. We have argued before, and we restate, that the government should announce tax breaks. We need waivers on value added tax, pay as you earn, among others. Similarly, various agencies that […]

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