KNBS reveals 230,935 top earners unknown to the State

KNBS director-general Macdonald Obudho. PHOTO | LUCY WANJIRU | NMG

Kenya has uncovered an additional 230,935 workers earning above Sh100,000 monthly who were not captured in previous official data, raising fears that firms have been under-declaring their payroll and denying the Kenya Revenue Authority (KRA) its fair share of taxes.

The Kenya National Bureau of Statistics (KNBS) has revised the pay data for 2.9 million Kenyans employed in the formal sector for the four years to 2020.

A source at the KNBS said the firms have been omitting some regular perks while reporting the workers' payroll, prompting the revision of the salaries data.

The revision has seen those earning over Sh100,000 monthly jump from 79,909 captured in 2020 to 310,884, outing over 230,000 top earners whose firms have been under-declaring their salaries.

Last year, the number of workers earning over Sh100,000 jumped 15 per cent or 48,000 more to 358,833.

This represented 12.37 per cent of the total workforce, a share that analysts reckon nearly matches Kenya’s consumption patterns.

In 2020, the under-reported figures showed that the share of those earning over Sh100,000 stood at 2.7 per cent of the formal sector workers.

The measly 2.7 per cent pointed to a larger share of high-income earners whose lifestyles are not in tandem with the taxes they pay or their declared income.

The KRA had consistently questioned the data, arguing that only a few Kenyans have officially registered as belonging to the high-income earners’ bracket despite the growth in conspicuous consumption in regions 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.

The statistics body mainly relies on questionnaires sent to companies when collecting the wage data—with a small input from the KRA— suggesting that firms are now coming clean on the actual amounts they are paying employees.

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

In both the old and revised data sets, the total number of Kenyans in the formal workforce remained largely unchanged at 2.74 million, indicating that the sharp changes in the wage brackets were due to revisions in declared earnings rather than new entrants coming into the workforce.

The revised data for 2020 shows a sharp drop in the number of workers earning less than Sh50, 000 by 862,805 to 1.17 million.

The number of those earning between Sh50, 000 and Sh99, 000 rose by 633,368 to 1.25 million.

The rise in the number of those earning over 100, 000 by 15 per cent points to the continued recovery of the economy in the post-Covid-19 period.

The pandemic cost the economy hundreds of thousands of jobs as companies responded to restrictions and reduced trade by laying off workers.

In 2020 the economy shrunk by 0.3 per cent, reflective of a general recession in the global economy, but recovered strongly last year to post a growth of 7.5 per cent last year.

This added 166, 810 new formal jobs to the economy, signalling a resumption in hiring after economic growth rebounded from Covid-19 shocks.

This marks the highest number of jobs created by companies since 2015 when the economy created 213,000 positions in the formal sector.

But the additional salaried jobs in the formal sector fell short of the 192,400 jobs, which were shed a year earlier.

The highest-paying jobs are concentrated in the private sector, which contributed 65 per cent of all the top earners, equivalent to 244,917 jobs.

The public sector, which comprises parastatals, and the national and county governments, employed 113,916 of those taking home the largest pay cheques.

Men continued to dominate the top pay scale, taking up 65 per cent or 233,228 openings in both private and public sectors, compared to 125,605 women in this club.

The education sector, which is among the largest formal employers in the country, accounted for the largest share of those earning above Sh100,000 at 79,828 individuals—representing lecturers, administrators and secondary school teachers, among others.

Wholesale and retail trade was second with 45,743 of the top earners, followed by human health at 36,134 and agriculture at 34,420.

Financial services and manufacturing contributed 30,787 and 28,346 jobs to the top pay scale respectively last year.

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

The informal nature of these jobs makes it hard to determine their wage scales and contribution.

In total, however, the private sector doled out the biggest pay cheque of Sh1.64 trillion last year, equivalent to 68.4 per cent of the total wage earnings of Sh2.405 trillion in the country.

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

Public sector wages stood at a cumulative Sh760 billion, with the Teachers Serve Commission the single-biggest payer at Sh259.6 billion.

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Note: The results are not exact but very close to the actual.