Kenya Revenue Authority (KRA) is betting on corporate taxes to close the gap left by dwindling Pay as You Earn (PAYE) taxes.
PAYE, which the taxman says is shrinking as a result of companies freezing employment as well as laying off employees, has left a gaping hole in KRA’s quest of hitting the Sh1.77 trillion tax collection target for the 2017-18 fiscal year.
PAYE is a withholding tax on income payments to employees by employers which are eventually remitted to KRA.
“We are aware that there have been major lay-offs in sectors such as banking, retail and even media.
Even when Treasury Cabinet Secretary Henry Rotich read the budget speech last week, he announced that the Government will be freezing hiring of new employees,” said KRA Deputy Commissioner in Charge of Policy Unit James Ojee said in an interview with The Standard.
“This of course will have a negative effect on our PAYE collection.”
He said KRA will now target increased corporate taxes. “This is because, as companies restructure, they automate their services, which makes their business models more effective and profitable.