Payroll taxes growth at new low on job losses, pay cuts

Kenyan workers and job seekers endured one of the hardest times in the year ended June 2020 with statistics released by the taxman Thursday showing payroll receipts grew at the slowest pace in more than a decade.

Pay As You Earn (PAYE) taxes rose a measly two percent to Sh401.31 billion in the period, signaling an environment of job cuts, hiring freezes and a pause on pay increases which were exacerbated by global coronavirus shocks.

The Kenya Revenue Authority (KRA) blamed the dismal performance in taxes on income by individuals on the economic fallout as a result of the contagious Covid-19 pandemic.

The taxman argues that PAYE collections had grown by an average of 11 percent in eight months through February 2020 before the contagious virus hit in March, resulting in trade and travel restrictions which hammered tax receipts from April.

“The slow growth was driven by decline in employment rate in the fourth quarter emanating from measures taken mainly by private firms to reduce operating costs,” KRA Commissioner-General Githii Mburu said in a statement Thursday.

The Covid-19 containment measures saw companies scale down operating hours which in turn hit their sales resulting in reduced earnings for homes and hit the businesses.

Companies, as a result, kept a tight lid on operating costs by cutting their workforce, slashing salaries and adopting unpaid leave policies.

The drop in tax receipts was deepened by tax reliefs offered by Treasury secretary Ukur Yatani from April to cushion businesses and workers from the economic shocks of Covid-19 pandemic.

Some 287,481 Kenyans lost their jobs in the first three months of the year, a quarterly labourforce survey by the Kenya National Bureau of Statistics suggested early in June, with the situation worsening from April due to partial trade lockdowns and travel restrictions.