Economy

PAYE surpasses pre-Covid levels as firms recover

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Times Tower in Nairobi, the headquarters of Kenya Revenue Authority (KRA). Picture taken on Thursday, October 15, 2020. PHOTO | DENNIS ONSONGO | NMG

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Summary

  • Taxes collected from workers have surpassed the Pre-Covid levels, underlying the recovery among corporates.
  • Latest data from the Kenya Revenue Authority (KRA) shows that Pay as You Earn (PAYE) — a tax charged on resident and non-resident individuals in employment— rose to Sh221.33 billion compared to Sh205.27 billion in six months to December 2019.

Taxes collected from workers have surpassed the Pre-Covid levels, underlying the recovery among corporates.

Latest data from the Kenya Revenue Authority (KRA) shows that Pay as You Earn (PAYE) — a tax charged on resident and non-resident individuals in employment— rose to Sh221.33 billion compared to Sh205.27 billion in six months to December 2019, representing a 7.8 per cent growth above the pre-pandemic period.

This is despite a slower pace of growth in jobs by both the public and private sectors.

“PAYE registered a performance rate of 105.7 per cent in the first half after a collection of Sh221.328 billion against a target of Sh209.339 billion resulting in a surplus of Sh11.989 billion. The performance was mainly driven by gradual growth in employment and the emanating economic recovery,” KRA stated in the tax revenue performance report for the half-year period 2021/2022.

The improving collections come on the back of the recovery triggered by the full reopening of the economy after the lifting of curfew and rollout of Covid-19 vaccines. This prompted companies to hire new workers or recall suspended staff. Employers have also reversed salary cuts resulting in more taxes.

This comes at a time when the taxman has been under pressure to bring more Kenyans into the tax bracket.

The Stanbic Bank Kenya's Purchasing Managers Index (PMI) showed that companies have raised their staff levels for eight consecutive months in December due to increased demand and new business.

The index which measures month-on-month changes in private sector activity – showed that hiring was lower than in November when it hit two–year high. However firms indicated the need to reduce work logs.

The PAYE amount in the half-year period was 45 per cent higher compared to Sh152.62 billion in the same period last year when the economy witnessed sustained job cuts and incomes, especially in the private sector due to depressed earnings as a result of flagging demand for goods and services.

The government had also applied the tax relief measure exempting people earning a gross monthly income of Sh24,000 to cushion low-income earners amid depressed revenues due to the pandemic.

The tax reliefs that took effect in April 2020, and jobs cut cost the authority in revenues leading to a 25.6 per cent decline in the PAYE collections, and pilling pressure on the authority to meet targets.

The taxes from the working group has been on a growth trend from Sh129.22 billion in 2014.