Accountants have asked Parliament to amend the law to ensure that taxes and levies are netted off before an employee's pay is subjected to Pay as You Earn (Paye).
The Institute of Certified Public Accountants of Kenya (ICPAK) and consultancy firm Deloitte told Parliament that to prevent over-taxation on personal income, a maximum tax band should be set.
The accounting firms told the Finance and National Planning Committee that the highest rate of PAYE should not be higher than that of the corporation tax.
“Companies are allowed deductions and only profits are taxed at 30 percent. But for those who earn salaries, they pay more in PAYE than corporation tax,” Fred Omondi, partner and legal leader at Deloitte, said.
“I am aware the Treasury intends to lower corporation tax to between 25 and 28 percent but Paye is set at 32 percent and 35 percent for those earning more than Sh800,000. The highest rate of Paye shouldn’t exceed the corporation rate.”
ICPAK, consulting firms Deloitte, Westminster Consulting and the Institute of Economic Affairs (IEA) appeared before the National Assembly’s Finance Committee chaired by Molo MP Kuria Kimani to make submissions on the proposed National Tax Policy.
Kenya is seeking to enact a national tax policy that will guide taxation to ensure tax predictability.
The House committee is taking views on the National Tax Policy that seeks to expand the tax base and enhance fairness and equity in the tax system as well as embrace international best practices.
“We are hoping that these few days of rigorous engagement with the stakeholders [we] will come up with a document that will guide our tax policy so that the next Finance Bill will be based on a policy that has been agreed,” Mr Kimani said.
The accountants faulted the proposed tax policy, arguing it favours a few sectors while hitting low-income earners hard.
