Workers across Kenya have received 6.13 billion Kenyan Shillings in lower payroll taxes as an added benefit of the expansion of the Pay-As-You-Earn (PAYE) bands and the increase of the minimum taxable income.
According to the Kenya Revenue Authority (KRA) the policy measure, reduced the payroll tax base for the year ended June 2019.
It has been enforced for the second year running from January 2018.
In January 2018, the Treasury expanded the Pay-As-You-Earn (PAYE) tax bands by 10 percent, which raised the effective tax-free income threshold from 12,260 Kenyan Shillings to 13,486 Kenyan Shillings per month.
This is after a similar increase a year earlier (2017), which largely benefited individuals like cooks, messengers, security guards and waiters, who are at the lower rungs of the income ladder.
The policy measure has also raised the monthly personal relief (MPR) of workers from 1,280 Kenyan Shillings to 1,408 Kenyan Shillings.
The changes led to added savings of between 365 Kenyan Shillings and 1, 274 Kenyan Shillings per month depending on varying salaries.
Commissioner General of the Kenya Revenue Authority (KRA); James Mburu stated via a reference to the revenue performance for the 2018 to 2019 financial year, “Tax policy, driven by the impact of the widening of tax bands, reduced the revenue base by 6.125 billion Kenyan Shillings cumulatively.”
The tax policy led to a tax savings of about one percent or less for workers who earn a monthly gross pay of more than 50,000 Kenyan Shillings. This means the tax savings were largely dissolved by annual inflation which averaged 7.2 percent in the 12 months ending in June 2019.
According to Daily Nation official statistics showed that in 2017, some 69,093 out of 2.656 million workers were on a gross monthly pay of 15,000 Kenyan Shillings.
Data from the Kenya Revenue Authority (KRA) shows that Pay-As-You-Earn (PAYE) collections rose by 7.9 percent in the fiscal year ending in June 2019, and indicated that around 378.33 billion Kenyan Shillings was netted compared to the 350.631 billion Kenyan Shillings from a year earlier (2018).
