Tax Burden and the Struggle of the Kenyan Worker: Is It Worth Going to Work Every Morning?
Don CM Wanzala
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Introduction: The Reality of the Kenyan Taxpayer’s Burden
The tax landscape in Kenya has become increasingly oppressive, leaving many Kenyans to question whether it’s even worth waking up every morning to go to work. With multiple layers of deductions and a hefty VAT, the system places a crushing burden on employees while the majority of citizens struggle to access essential public services that these taxes are meant to fund. Our tax system appears to punish the average Kenyan while benefiting the affluent, creating a vicious cycle of poverty, debt, and inadequate social services.
This article explores the depth of this tax burden and highlights why tax justice has become a critical issue for Kenyan citizens.
1. A Breakdown of Salary Deductions: 49.25% of Gross Income
For the average Kenyan employee, the take-home pay is heavily eroded before it even reaches their bank account. Here’s a breakdown of the main deductions:
PAYE (35%): Income tax (Pay-As-You-Earn) constitutes the lion's share, swallowing 35% of gross income.
NSSF (6%): With the recent reforms, contributions to the National Social Security Fund take up 6% of gross income.
Pension (4%): A 4% deduction goes toward pension contributions, which aims to support retirement, though the current economic hardships make it challenging to envision retirement.
SHIF (2.75%): The Social Hospital Insurance Fund, formerly National Hospital Insurance Fund(NHIF) takes 2.75%, promising affordable healthcare which, unfortunately, many Kenyans still struggle to access. Worse still the newly rolled out SHIF or SHA (Socal Health Authority) has fewer benefits.
Housing Levy (1.5%): A 1.5% deduction goes toward the controversial Housing Levy, a policy that has been met with criticism due to concerns over transparency and accessibility.
In total, these deductions add up to 49.25% of gross income, leaving employees with only 50.75% to take home. This paints a grim picture, as nearly half of one’s earnings are deducted before even thinking about daily expenses.
2. The Impact of VAT on Net Salary
After the deductions, workers are left with half their salary, but the burden doesn’t end there. When they spend their net income on essential goods and services, they are hit with another 16% Value Added Tax (VAT). Following the common budgeting rule of 50% on essentials, 30% on discretionary spending, and 20% on savings, VAT becomes an invisible hand reaching into the pockets of Kenyans who are already squeezed by deductions.
Considering that around 80% of the net salary is likely spent on goods and services subject to VAT, this further takes away 6.5% of the gross salary.
3. The Total Effective Tax Burden: A Whopping 55.75%
When we add VAT (6.5%) to the deductions from the gross salary (49.25%), we reach a staggering total effective tax burden of 55.75%. This leaves Kenyan workers with only 44.25% of their hard-earned income for personal expenses, savings, and investments.
In other words, a Kenyan worker only takes home 44.25 Ksh for every 100 Ksh they earn. This is an unsustainable system that disproportionately affects low- and middle-income earners, limiting their ability to improve their standard of living.
4. The Debt Trap: Where Do Our Taxes Really Go?
Despite this enormous tax burden, public services such as healthcare, education, and food security remain largely underfunded and inaccessible to many Kenyans. According to recent statistics, around 70% of the revenue collected by the government goes toward servicing national debt, leaving only 30% for actual service delivery and operational costs.
This raises a crucial question: if most of our taxes are used to pay off debt, how will essential services be funded? And what does this mean for the future of Kenya’s workforce, who see little return for the hefty taxes they pay?
5. The Case for Tax Justice: Why This Must Change
Kenya’s tax policies are highly regressive, meaning they take a larger percentage of income from low-income earners than from high-income earners. This regressive tax structure, combined with inadequate service delivery, deepens poverty and widens the inequality gap in our society.
To create a fairer, more sustainable system, Kenya must pursue tax justice, a concept that seeks to balance the burden of taxes with the benefits citizens receive. A fair tax system should uphold the principle of equity, where taxes are based on the ability to pay, and efficiency, where tax revenue is used effectively to improve the quality of public services.
6. Recommendations: Building a Fair and Effective Tax System
To address the tax burden and support a thriving workforce, here are some recommendations:
Revise Income Tax Policies: Reduce the PAYE rates for low- and middle-income earners. This would provide immediate relief to those who are most affected by the heavy deductions.
Streamline Public Spending: Allocate a larger portion of revenue to essential services like healthcare, education, and infrastructure instead of debt repayments and unnecessary expenses. Ensuring transparency in government spending is crucial to rebuilding public trust.
Progressive Taxation: Implement more progressive tax policies where higher income brackets are taxed more heavily. The wealthy should bear a greater share of the tax burden rather than burdening the working class.
Transparency in Debt Management: The government must adopt transparent debt management practices to ensure loans are used effectively for economic growth. This will reduce reliance on taxes to service debt.
Enhance Social Protection Programs: Use taxes to bolster social welfare programs that protect vulnerable groups and improve access to basic services. This could provide a safety net for citizens struggling with the high cost of living.
Conclusion: Advocating for a Livable Future
The current tax regime forces Kenyan workers into an endless cycle of labor without adequate reward, trapping them in economic hardship and stifling the potential for upward mobility. It is time for us to rethink Kenya’s tax structure and prioritize tax justice so that all Kenyans can feel that their hard work genuinely contributes to a better life.
As Kenya marches toward economic progress, we must ensure that our tax policies reflect fairness, support growth, and most importantly, improve the quality of life for all Kenyans. After all, isn’t that what taxes are supposed to do?
About the writer
Don Chrisantos Michael Wanzala, better known as Don CM Wanzala or DON SANTO, is the creative mind behind the captivating anthology book 'Words of a Klassikan,' and 'Klassik Era: the Genesis' which he co-authored with Klassik Nation. With a diverse background spanning consultancy (leadership, governance, and business in the digital era), entertainment, media, FMCG, education, mobile, and ride-hailing industries, DON SANTO brings a wealth of experience to his writing. As an entrepreneur and social commentator, he infuses his work with insights gleaned from his extensive journey through various sectors. Through his words, DON SANTO offers a unique perspective on business, entrepreneurship, life, love, resilience, and personal growth, inspiring readers to embrace their true selves and navigate the complexities of the modern world.