Poor pay to workers starves taxman of much-needed cash

KRA Deputy Commissioner for Research Joseline Ogai. He has said income tax was among the worst-performing revenue heads owing to the layoffs and low pay. [Wilberforce Okwiri, Standard]

Salaries for most workers stagnated last year, especially in the private sector, giving the most probable reason that the average Kenyan is feeling poorer.

Private firms had major struggles of their own, which spilt over to the employees, according to a new report by the Kenya Revenue Authority (KRA).

Average income tax paid by salaried workers rose by a paltry 1.1 per cent in the 2018/19 financial year, which was a direct reflection on the wage.

On the other hand, the average cost of living rose by seven per cent in the same period, which significantly reduced consumers’ purchasing power.

The report said low pay was compounded by the massive layoffs announced by major companies, either because they were struggling or owing to automation of services.

Only teachers enjoyed a good year with their incomes rising fastest, mainly on account of promotions and implementation of pay reviews.

Just by the huge number of teachers, estimated at 300,000, any small pay increment tends to have a sway on the national average meaning other workers fared worse than the numbers can tell.

Overall, however, the cumulative taxes collected from workers increased by only 8.1 per cent, lagging other revenue heads including VAT.

KRA Deputy Commissioner for Research Joseline Ogai said income tax was among the worst-performing revenue heads owing to the layoffs and low pay.

“It has a lot to do with the private sector which was not very good, and automation has reduced employment numbers and payroll taxes,” he said.

Commercial banking is among the sectors where jobs that were previously done by people have been taken away by technology, including tellers.

Embracing technology also means there are fewer new job openings, a fact that was illustrated by the tiny number of new Pay As You Earn (PAYE) accounts.

Mr Ogai said in the financial year to June 2019, the growth in new income taxpayers was depressed at 4.5 per cent. This was despite the strict compliance requirements for employers. The implication of the findings is that there are hardly any new formal jobs being created in the economy, which spells doom for the millions of job seekers entering the market hoping to get employed.

KRA also reported stagnation and even declines during specific months on domestic excise duty levied on cigarettes, beer and spirits. It is either the commodities have become too expensive owing to the heavy taxation or Kenyans do not have disposable income to indulge in drinking or smoking.

In the explanation provided, the consumed volumes of the products had fallen.