The 2019 National Budget Volume 1 Economic and Development Policies states that the relief is intended to address bracket creep and also increase working incentives for low to lower-middle income earners.
The 2019 Budget states that while there is significant need to provide relief to the formal sector income earners, the cost of such relief also presents a challenge.
To strike a balance, the budget introduces a modest reduction to PIT. This includes:
i) An increase in the tax free threshold to K12, 500; and
ii) An increase in the 22.0 per cent marginal rate threshold to K20, 000 from K18,000.
Those earning up to K20,000 will benefit from the lower PIT with the maximum benefit being K710.0 per annum or have a tax savings of K30.0 per fortnight
The Government says the relief is intended to address bracket creep which occurs when workers are pushed into higher tax brackets due to inflationary pressures on wages without corresponding increases in income thresholds leading to potential reductions in real wages.
The relief measures will also increase working incentives for low to lower-middle income earners.
PIT accounts for about 30.0 per cent of tax revenue and a quarter of the country’s total revenue collections.