NAIROBI, Kenya-Government will not scale down the Pay As You Earn (PAYE) deductions from salaried Kenyans until the next finance bill.
Treasury and Economic Planning Cabinet Secretary John Mbadi, while appearing in the Senate, asserted that the move is owing to revenue shortfalls by the Kenya Revenue Authority (KRA).
This is despite the government’s intention to take the PAYE taxes off the shoulders of Kenyans following simulation exercises conducted by the Treasury.
“We did some simulations on how to reduce the Pay As You Earn (PAYE),” Mbadi told Senators.
“What stopped us from implementing it in this finance bill was the failure by KRA to meet its revenue targets.”
The tax man had in the financial year ending June 30 capped its target at Sh2.537.
It, however, collected Sh2.407, a shortfall of Sh130 billion the close of the fiscal year, the authority had collected Sh2.407 trillion, missing its target by Sh130 billion.
According to Treasury, the shortfall was due to an array of factors, including macroeconomic challenges leading to weakening of the local unit against major global currencies such as the greenback, contracting lending rates, as well as the war in Ukraine and Gaza that disrupted global supply chains.
Mbadi, however, revealed that the government is currently aggressively undertaking reforms within KRA aimed at optimizing revenue collection through digitization.
He disclosed that the reduction in PAYE will be done progressively in line with reforms at KRA to ensure seamless operations.
Based on the current deductions, individuals earning up to Sh24,000 monthly are taxed at a rate of 10%.
Those earning between Sh24,001 and Sh32,333 are taxed at 25%, while income between Sh32,334 and Sh500,000 attracts a tax rate of 30%.
Higher income brackets of between Sh500,001 and Sh800,000 are taxed at 32.5%, and any income above Sh800,000 per month is taxed at the highest rate of 35%.
