REVENUE

High tax burden hurting low income households

In Summary

•According to the survey, there are 2.765 million workers on wage employment.

•Over the 5-year period, the trend on the proportion of PAYE has increased year on year

Traders at Kongowea market in Mombasa on March 10th 2017./JOHN CHESOLI
Traders at Kongowea market in Mombasa on March 10th 2017./JOHN CHESOLI

Indirect taxes are straining low-income households, whose consumption liability is higher than that of the wealthy.

The World Bank Fiscal Incidence Analysis for Kenya 2015/16 launched last August shows excise tax revenue on items in 2016 was highest on beer and airtime at Sh24.44 million and Sh15.54 million respectively.

An analysis conducted by the Institute of Certified Public Accountants in Kenya(ICPAK) between 2010 and 2015 indicated that tax revenue contributes over 90 per cent of total revenue collected in the country. Income tax is the largest contributor to the tax revenue basket.

 
 
 

During a policy breakfast meeting held at a Nairobi hotel in readiness of the upcoming budget reading,ICPAK public policy manager Elias Wakhisi said the government needs to fast-track the new income tax bill tabled in Parliament.

The Kenya Economic Survey 2019 indicates government revenues in Kenya averaged Sh348.37 billion from 2000 until 2019, reaching an all time high of Sh1514.83 billion in June 2018.

According to the survey, there are 2.765 million workers on wage employment in Kenya, which would mean that employees are contributing a disproportionate amount of government revenue.

One of the National Government priorities for 2019/20 is to modernize the income tax bill currently undergoing legal drafting as this will ease administrative bottlenecks and also improve compliance and revenue collection.

Over the 5-year period, the trend on the proportion of PAYE has increased year on year, while corporation tax has been on a downward trend.

The corporation tax regime indicates a high possibility that fiscal policies enforced to provide generous tax incentives to foreign corporations is decreasing the tax burden of large foreign companies rather than that of small and medium domestic enterprises.