Why Kenyans feel overtaxed despite Rotich’s claim all is okay

Why Kenyans feel overtaxed

That, laid out in staccato, was a question from Treasury Cabinet Secretary Henry Rotich to the Kenyan taxpayer, while he was speaking to NTV journalist Julians Amboko on June 12, a day before the Finance boss read the 2019/2020 budget.
A Nation Newsplex analysis of taxation data of selected countries shows that Mr Rotich had his facts right, but the context wrong.


“I think he is wrong. In Kenya nobody ever talks about the extra taxes imposed by regulatory agencies who seem to have a blank cheque to levy charges. Some of those countries he is citing, like Tanzania, do not have so many parallel taxation,” says Consumers Federation of Kenya (Cofek) Secretary-General Stephen Mutoro.

It is indeed true that, at 16 percent, Kenya’s standard VAT rate is the lowest in the East African Community (EAC), where all other countries tax at 18 percent except South Sudan (20 percent). But Kenyans probably know that fellow Africans in some countries pay much less. Botswana’s standard VAT is 12 percent and Nigeria’s is five percent. The government also taxes individual income at a maximum 30 percent for earnings that fall within the topmost income bracket (Sh47,059 and above monthly), the same as in other EAC countries apart from South Sudan and Uganda, which hive off 15 percent and 40 percent of such incomes, respectively. Kenya’s lowest income bracket is taxed at 10 percent, only higher than Tanzania’s nine percent in the EAC.

Moreover, the Sh1,408 personal tax relief that all Kenyan taxpayers enjoy cushion those that fall within this tax band from parting with even a shilling in taxation.

However, comparing personal income tax among countries can be problematic, as countries have different numbers of tax bands that in turn have varying income limits. Kenya taxes individual income at five different rates, the highest in the region, Uganda and Tanzania at four each, and the rest at just two.

On income taxation bands, more is better, say tax experts, as it helps spread the tax burden equitably among the working population. An intention by the government to introduce a sixth taxation band to be taxed at 35 percent was opposed by tax experts. The World Bank recommends that governments “balance goals such as increased revenue mobilisation, growth, and reduced compliance costs with ensuring that the tax system is fair and equitable”.

All EAC countries have a standard corporate income tax of 30 percent, except South Sudan (25 percent). Taxation gobbles up two in five shillings (37 percent) of the profit made by Kenyan businesses, according to the World Bank’s Doing Business 2019 report. The country comes third after Tanzania (44 percent) and Burundi (41 percent).


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