Kenyan salary earners hit hard by heavy taxation
As reported by the Kenyan Business news publication, BusinessDaily, the Tax deductions from the National Social Security Fund (NSSF) surged substantially all year round, as peaking in February by at least 5 times, after a historic decision that upheld the 2013 NSSF Act.
With an upper maximum of Sh2,160, the pension contributions increased to 12% of pensionable wages, divided equally between the employer and the employee.
The report disclosed that the Finance Act of 2023 affected salary earners in a couple of ways, including the enactment of a housing tax set at 1.5% of gross salary.
The bill also came with new “higher Pay-As-You-Earn (PAYE) bands covering incomes of between Sh500,000 and Sh800,000 at 32.5 percent and for income exceeding Sh800,000 at 35 percent.”
“In our view, it doesn’t have an immediate benefit to the employee. While it might be beneficial to some, it may not cater to others, who may already be homeowners or have mortgages,” Deputy Secretary General to the Central Organization of Trade Unions (COTU) Benson Okwaro revealed to the publication.
There may be some relief next year, following the promise of a review of the “PAYE bands setting the highest rate at 25 percent from the current 35 percent as set out in the medium-term revenue.”
Workers continue to advocate for an increase in salary to help cushion the effects of the higher cost of living, but this poses some challenges for employers. The employers have disclosed that there is a significant surge in the cost of doing business, owing to a weaker currency.
“We are not signing new Collective Bargaining Agreements (CBAs) anymore. In the public sector, this is made more difficult by the Salaries Remuneration Commission, which must approve such raises. An employer will mention that they are already matching higher NSSF deductions and contributing to the housing levy,” Mr Okwaro said.
