393 Nairobi County staff escape PAYE tax deductions

City Hall

City Hall in Nairobi.

Photo credit: File | Nation Media Group

A total of 393 employees working for the Nairobi County government earned a combined salary of Sh52.6 million during the financial year ended June 2023 without paying income tax as required by law, a new report shows.

The Auditor-General Nancy Gathungu’s report for the County Executive of Nairobi City indicates that the officers were not defined under the category of people with disabilities, who are entitled to a tax exemption on all remuneration gained from employment.

“Analysis of payroll revealed a total of 393 officers whose PAYE (Pay As You Earn) was not recovered from their salaries as required under the Income Tax Act,” states the auditor in the report.

“The employees were not defined under the category of People with Disabilities. The officers earned a total of Sh52.6 million from which no taxes were recovered.”

The revelation comes at a time when workers are choking under the weight of heightened taxation as the government implements the Finance Act, 2023 and has proposed additional taxes and levies.

In her report, the auditor has also flagged the county's payroll after it emerged that three employees shared a common bank account during the review period, pointing to a possible racket to defraud City Hall coffers.

At the same time, the auditor report revealed that 252 employees were found to be earning net income that was less than a third of their basic pay, contrary to guidelines provided in the Human Resource Policies and Procedures Manual for the Public Service, 2016, which provides that public officers shall not over-commit their salaries beyond two-thirds of their basic salaries.

During the year, two officers were hired by the county on permanent and pensionable terms despite having attained the age of 50, while four others were actively on the payroll but without allotted salaries.

The report says 178 officers were paid leave allowances twice during the 12 months with the total payout amounting to Sh15.4 million. Another 26 staffers on monthly gross pay were also paid additional allowances such as house supplementation, rental and service gratuity totalling Sh17.6 million.

“Analysis of the payroll shows that 395 officers were paid salary arrears for a duration between seven and 12 months during the year under review. Further, 64 officers were paid arrears ranging between Sh300,000 and Sh6.8 million all totaling Sh82.3 million during the financial year. The nature of the allowances totalling Sh100.1 million could not be determined,” wrote the auditor.

The county has also been accused of being non-compliant with the Persons with Disabilities Act, 2003, which demands that at least five percent of the total composition of employees be reserved for persons living with disabilities.

According to the auditor, the review of the payroll shows that only 167 employees out of 13,354 were placed under the special category, which translates to 1.25 percent of the total workforce.

On ethnic composition, the county once again failed the test after the report unearthed that up to 5,368 staff members, representing 40 percent of all workers, were from one ethnic group contrary to the National Cohesion and Integration Act, 2008.

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