Kenyans earning over Sh100,000 revealed

The number of Kenyans earning more than Sh100,000 rose 2.71 percent last year to hit 84,907, reflecting Kenya’s growing inequality in the formal sector and tax avoidance by wealthy Kenyans in the informal sector.

Kenya National Bureau of Statistics (KNBS) data released Tuesday show the top earners increased by 2,234 members compared to a rise of 3,178 a year earlier.

Those earning more than Sh100,000 accounted for 2.9 percent of the 2.92 million formal workers captured in the Kenya Revenue Authority (KRA) database.

The 2.9 percent share is not in line with luxury spending and accumulation of property, including purchase of homes and high-end cars that have been witnessed recently, analysts say.

The KRA has consistently questioned data showing a measly 2.8 percent of workers are paid Sh100,000 and above, pointing to a larger share of high income earners whose lifestyles are not in tandem with the taxes they pay or their declared income.

The taxman says a sharp increase in imports of luxury items and multi-million-shilling investments in real estate have opened its eyes to a potentially massive tax leakage, which if tapped could yield billions of shillings in additional revenues to the Exchequer.

The KRA’s argument is supported by the fact that only a few Kenyans have officially registered as belonging to the high-income earners’ bracket despite the growth in conspicuous consumption in areas such as Nairobi.

The taxman reckons there are workers who earn extra cash from ventures such as real estate, dividends and royalties, but fail to declare the additional income.

The KRA has struggled to bring more people into the tax brackets and curb tax cheating and evasion in the quest to meet targets in an economy where government income has consistently failed to meet targets.

Nearly half or 45.98 percent of the 2.93 million formal workers captured in the KRA database earned below Sh30,000, underlining the problem of Kenya’s pay inequality.

The earnings inequality has partly been attributed to the previous centralised system of government, which guided sharing of resources since Independence.

The devolved system of government, which took off in 2013, raised hopes of addressing the economic imbalance, as analysts say there is a need to offer incentives to attract private investors to counties and spread wealth.

Modest economic activity in the past two years has entrenched the income inequality with fewer jobs and stagnant pay hurting the middle class most.

While Kenya’s economy expanded 5.8 percent last year from 4.8 percent in 2017, private sector activity — which translates to jobs and higher pay — has remained muted.

About 78,500 new formal jobs were created in the economy last year, unchanged from 2018 and down from 114,400 in 2017, according to the Economic Survey 2020 data.

This is the slowest pace of formal job growth since 2012 when the economy churned out 75,000, adding to the crisis of youth unemployment. The data does not capture job cuts and net employment.

The drop in new jobs combined with stagnant wages for majority of workers has raised queries over equitable distribution of the growth dividend among Kenyans considering the economic growth expansion witnessed recently.

Official data shows that private sector produced the bulk of those earning above Sh100,000 with men dominating the top pay scale.

About 64.5 percent of men or 54,681 of them earned more than Sh100,000 compared to 30,126 women in this club.

The highest-paying jobs are concentrated in the private sector, which had 73,099 or 86.2 percent of all the top earners.

The public sector, including parastatals, the national and county governments, employed 11,708 of those taking home the largest pay cheques.

The education sector accounted for the largest share of those earning above Sh100,000 at 30.9 percent or 17,879 individuals, representing lecturers, administrators and secondary school teachers among others.

RETAIL TRADE

Financial services were second and accounted for 11,598 or 15.33 percent of the top earners, followed by wholesale and retail trade and repair of motorcycles and motor vehicles whose number stood at 10,909 or 4.2 percent.

None of employees in activities such as mining and quarrying, and production of undifferentiated goods were earning above Sh100,000.

The actual labour earnings across the country remain unclear, with most Kenyans employed in the informal agricultural sector.

In total, however, the private sector has been doling out the biggest pay cheque in excess of Sh1 trillion last year or more than 70 percent of the total wage earnings.

This underlines the critical role of companies in creating and sustaining earnings from employment.