All governments around the world need money to run. There is need, therefore, to improve the administration of revenue. This is essential for the usage of revenue for the improvement of governance. This simply implies that if there is no revenue, then there is no governance. Revenue is what is used in the running of day to day government activities including payment of salaries for all public servants.
How does the government of Kenya raise its revenue? Here is a breakdown of various types of taxes in Kenya.
Income Tax
Income tax is levied under three categories namely personal and corporate tax, withholding tax and advance tax.
Personal and Corporate Tax
This types of tax is levied on individuals, corporations and some other types of earnings. This is the tax that is deducted from the actual earnings of an individual or from the profits of a company. These type of taxes are gotten from the formal sector business profits as well as from the employment earnings. This includes the Pay as You Earn (PAYE). Under PAYE, the employer is an agent of the tax authority and he or she is required by law to charge and remit taxes on employment income including the value of all taxable benefits.
The question is, do all the employers do remit these taxes? The answer is no. this is because most employers do not often give the correct number of the employees that they have. In fact, most of them have evaded the payment of this tax through paying their employees via mobile phones and in the process, keeping the taxes to themselves.
Withholding Tax
These are taxes that are deducted from interest dividends, royalties, management as well as professional fees, commissions, pension or retirement annuity, rent, appearance or performance fees from an audience in a sporting or entertainment place.
The table below shows some of the resident withholding tax rates
| 1 | Dividend Income | 10 % |
| 2 | Quality Dividend | 5 % |
| 3 | Government Bearer Bond | 15 % |
| 4 | Housing Bonds | 10 % |
| Commission payable by Insurance companies | ||
| 5 | Insurance Brokers | 5 % |
| 6 | Insurance Agents | 10 % |
| 7 | Royalties | 5 % |
| Consultancy, agency fee | 5 % | |
| Contractual fee | 3 % | |
The table below shows some non-resident withholding tax rates
| 1 | Management and professional fees | 20% except commission to overseas agents for flower exp. |
| 2 | Rent on immovable property | 30 % |
| 3 | Rent on movable property | 15 % except aircraft leasing |
| 4 | Dividend income | 10 % |
| 5 | Interest other than pension | 15 % |
| 6 | Pension | 5 % |
| 7 | Appearance or performance purposes | 20 % |
| 8 | Supporting appearance of performance | 20 % |
| 9 | Management and professional fee | 2 % |
| 10 | Interest on bearer instruments | 20 % |
Advance Tax
This form of tax was introduced in the year 1996. This is usually collected from the owners of the public service vehicles. This is a tax that is usually paid in advance before a public service vehicle or a commercial vehicle is registered.
Vans and pickups, trucks and Lorries are levied 1500 shillings per ton of load capacity per year or 2,400 shillings whichever is higher. Saloons, station wagons, minibuses, buses and coaches pay 60 shillings per passenger capacity per month or 2,400 whichever is higher.
Value Added Tax (VAT)
This tax was introduced in Kenya in January 1990 and it replaced the SALES Tax. This is a multistage tax that is levied to sales of goods and services at all the stages of production as well as the supply chain. According to the VAT Act, there are three tax rates:
- 16% is the general tax rate and is applicable to all the taxable goods as well as taxable services.
- 14 % this is applicable to hotels and restaurants.
- 0 % this implies to certain categories of goods and services that includes the import of farm inputs.
There is an Excise Duty that took effect as from the 1st of December 2015. This platform will bring you in detail what the excise duty entails and how it has changed the chat in Kenya.
(Data from Parliamentary Service Commission on Unlocking Revenue Potential in Kenya)
Article by Juma Fred.