If you earn Sh50,000 a month, you pay tax like a millionaire

Are incomes of Sh30,000 and Sh1m taxed at the same rate?

“…Currently the injustice Kenyans face is that, if you are earning Sh30,000 per month, you are put in the same bracket with somebody who is earning say Sh1 million, the people who are actually looting this state...”

-          Third Way Alliance Presidential candidate Ekuru Aukot at the launch of the party’s manifesto on July 1

Kenya has five income tax brackets. In a public notice, Kenya Revenue Authority directed that effective January this year, all income above Sh42,781 would be taxed at a rate of 30 per cent. 

In the second highest band, incomes of more than Sh32,249 but under Sh42,781 are taxed at 25 per cent. In the third band incomes from Sh21,715 but under Sh32,249 are taxed at 20 per cent, while those from  Sh11,181 but under Sh21,715 are taxed 15 per cent.

The lowest tax band, for incomes under Sh11,181 attracts a tax rate of 10 per cent.

HUGE DISPARITY

But in his 2017 Budget Speech on March 30 Treasury Cabinet Secretary Henry Rotich announced that he had expanded the tax bands by 10 per cent and increased the personal relief by 10 per cent.

This, he said, would raise the lowest taxable income to Sh13,486 and highest to Sh47,059.  

The lower limit of the highest tax bracket includes incomes that are below the average income, which stood at Sh53,736 in 2016.

So a person who earns Sh42,781, which is higher than Sh30,000, and one who earns Sh1 million a month, both pay tax at the rate of 30 per cent.

Based on the rules as at January, Dr Aukot's claim is off by or about 17,000 where the lower limit of the highest tax bracket is 47,059.

It is true there is a huge disparity between the upper and lower limits of the top tax band. Although many people involved in corruption are themselves wealthy, there is no evidence everyone earning Sh1 million or more is looting the state.