A report by the National Treasury has revealed that the government has lost Sh 62.1 billion in Pay As You Earn earnings, making it the worst hit by the Covid-19 pandemic.
In a twelve-month analysis on revenue collection ending January 2021, the drop in PAYE earnings represents 44.5 per cent of the total plunge in ordinary revenues for the period, tabulated at Sh139.5 billion.
The drop in collections from salaried Kenyans is largely attributable to deductions on the rate of Value Added Tax in April last year where the maximum rate of PAYE fell to 25per cent from 30 per cent as part of government cushioning measures.
According to the report, the total PAYE collections during the period under review totals to Sh 179.2 billion up from Sh 241.3 billion at the same time last year.
The sharp decline in the revenues was further attributed to widespread job cuts and pay cuts occasioned by Covid- 19 in 2020 as firms adopted cash-preservation stances to cushion against the pandemic’s turbulence.
The report sent to newsrooms on Thursday however acknowledges that job losses were already on the rise at the onset of the pandemic with the number of employed Kenyans falling by nearly 250,000 between January and March last year.
The trend in joblessness was aggravated between April and June when Kenya’s unemployment rate doubled to 10.4 per cent after 1.7 million Kenyans were rendered jobless in three months.
“Revenues from PAYE are expected to trend upwards this year supported in part by a resumption to economic activity, implying greater job creation and from the reversal of tax relief measures which raised the PAYE rate,” read the report in part.
Government earnings from import duty declined by Sh1.9 billion while excise duty and corporate tax revenues fell by Sh584 million and Sh4 billion respectively.
The report further showed that VAT fell by Sh29.9 billion over the 12 months period following a lower rate at 14 per cent which has also since been reversed to 16 per cent.
Edited by Kiilu Damaris
