support those companies by buying their
products.
Innovation
In terms of a global crisis, business must
still continue. Your normal channels of
business may have been disrupted but this
does not stop the utility of your products to
your customers. Physical contact may have
been limited but there are other avenues
that can be taken advantage of. This is
where innovation comes in. Remember,
if you are not innovative then the fate of
dinosaurs awaits your firm.
Adoption of technology is one of the most
innovative ways that companies can latch
on. Accept payments through mobile
banking instead of the traditional notes
and coins. Banks have recently integrated
their customers’ accounts to mobile and
internet banking. Online meetings which
are by far cheaper, have replaced the
traditional board room meetings. Trainers
have now moved to conducting seminars
and workshops online in the comfort of
their homes. Retailers have adopted home
delivery for physical products for their
customers to enhance social distancing.
In some instances, pandemics have had
the effect of new business opportunities
for companies that seek solutions for
the pandemic. Some companies have
experienced stock outs of their products
which bring solutions to the pandemic.
Think critically on how your product
can offer solutions to the pandemic and
leverage on that point.
This pandemic also shows how the
business environment can change in just a
matter of months. In less than five months,
companies globally have to critically think
and change their business processes.
Business Continuity Plans (BCPs) have
had to be developed and implemented
in that time. Business leaders have had
to engage innovative techniques to stay
afloat.
Governments all over the world have
realized the impact of this global pandemic
and have also come up with innovative
ways to protect the citizenry. In Kenya,
the government recently announced some
fiscal measures to boost the local economy.
lowered to 7.25% from 8.25%. It also
reduced the Cash Reserve Ratio (CRR) to
4.25% from 5.25% that would give banks
the liquidity to lend more to the economy.
All this is aimed at encouraging individuals
and businesses to access credit in which
they can in turn invest boosting the local
economy. There is still room for further
decrease especially with the CBR which
would make loans cheaper. Generally,
cheaper loans incentivize the citizens to
take extra investments which can bring
more revenues in form of taxes to the
government.
As a business owner, take the opportunity
to talk to your bank about extending the
payment period of your loan facility. Be
keen to see that they have reduced the rate
in line with the directive from the central
bank. Always ask for your loan amortization
schedule regularly to track your loan
repayment. This option is also available to
individual borrowers.
VAT Rate
Value Added Tax (VAT) Rate has been
reduced from 16% to 14% effective 1st April
2020. This is a welcome to all consumers
who absorb the final effect of the tax.
Goods and services should become cheaper
as a result of this reduction. I would have
however advised that the rate should have
been reduced to 10% to aggressively protect
the consumers and help them feel the effect
of the saving. One of the essential services
that we would all see the effect of the saving
on is electricity.
The government has also committed to pay
VAT refund to release much needed cash
Central Bank Rate
into the economy. The delay in paying the
refund was affecting the businesses to the
The Central Bank Rate (CBR), the rate
extent that some had to borrow to keep
that banks use to price their loans, was
operations afloat. This came at an additional
inconvenience of interest expense. The fast
tracking of these refunds should be made
permanent.
Income tax changes
The government has further moved to
exempt persons earning Kes 24,000.00
and below from paying any tax. This is a
welcome relief to the low income earners as
they would have more disposable income
to purchase the essential items. Further
the 30% tax bracket has been abolished to
also increase the spending capacity.
Business income
The corporation tax rate has been reduced
from 30% to 25% to enable companies to
save and re-invest back profits into their
businesses. This is a welcome relief as the
companies face a tough time during the
pandemic period.
For small scale businesses, the Turnover
tax rate has been reduced from 3% to 1%.
They are the biggest beneficiary of this
directive as they also absorb the biggest
risk from the pandemic. They would be
able to save on tax and hence be able to use
the funds on other core business activities.
In conclusion, having a pandemic does not
mean marketing must stop. Analyze the
situation and think outside and beyond
the box of how to take advantage of the
situation for the survival of the firm. Stay
safe.
CPA Nicholas Gachara is a Tax
and Accounting Consultant. You
can commune with him on this
or related matters via email at:
[email protected].