Safaricom saves Sh2.3 billion from Covid-19 tax relief

Safaricom Sacco Chairman Paul Masava, ICT PS Jerome Ochieng and Safaricom Chief Corporate Affairs  Stephen Chege cut the cake to mark the 20th Safaricom Sacco Ltd anniversary.[Elvis Ogina,Standard]

Mobile service provider Safaricom reaped Sh2.3 billion in tax benefits, following the move by the National Treasury to introduce tax incentives for corporates to help them weather the economic disruption from Covid-19 last year.

According to Safaricom’s annual report, the tax bill reduced by Sh2.3 billion due to corporate tax incentives, although new laws reducing wear and tear allowance cut the benefits accrued.

“On April 25, 2020, the State enacted the Tax Law (Amendment) Act, 2020 which reduced the corporate tax rate from 30 per cent to 25 per cent,” explains the firm in its annual report.  “The new rate of 25 per cent was applicable for the period between April and December 2020. Resulting from this change, the company’s total corporate income tax reduced by Sh2.3 billion.”

Last year, Treasury Cabinet secretary Ukur Yatani announced temporary tax cuts that included a two per cent reduction in Value Added Tax (VAT) to 14 per cent as part of measures to cushion the economy from the pandemic.

Safaricom however says the benefits from the tax breaks were eroded by reduced allowances in other avenues. According to the telco, the revised tax rates also reduced wear and tear allowances for various categories of assets. “Safaricom’s wear and tear allowance for the year was Sh20.5 billion in the 12 months ended 31 March 2021. If the rates had not been changed, the wear and tear allowance would have been Sh36.5 billion.”

Safaricom paid out Sh105.9 billion in duties, taxes and licence fees to Treasury last year and Sh915 billion since inception.