Majority of Kenyans not paying taxes - survey

Only three out every 10 Kenyans (29%) are paying their Pay As You Earn (PAYE) taxes on income according to a new survey.

The survey by the East African Tax and Governance Network (EATGN) co-authored by Tifa Research paints a worrying picture to tax compliance and revenue mobilization efforts in the country.

At the same time, only 52 per cent of surveyed respondents reported to have filed their tax returns with the bulk of this sum at 70 per cent being from the formal sector.

Meanwhile, 21 per cent of respondents indicated that they avoid paying taxes as much as possible.

Respondents failing to account for their fair of taxes cite poor service delivery from collected taxes, corruption and confidence that they cannot be caught as tax cheats.

56 per cent of Kenyans however indicated that they are willing to pay taxes even if there are no consequences for tax avoidance, leaving about 44 per cent who would gladly avoid taxes should immunity from punishment exist.

Curiously, 31 per cent of Kenyans have cited tax avoidance in government revenue target misses despite being direct contributors of the shortfall.

Avoidance as a factor for missed collections is ranked ahead of corruption, poor economic output, over-ambitious targets by the Kenya Revenue Authority (KRA) and debt.

Half of Kenyans say the current tax system is unfair, attributing it largely to poor people paying more taxes while the wealthy are not required to pay enough tax.

According to Leonard Wanyama, a coordinator with the EATGN, tax avoidance remains largely in the purview of the rich.

“Tax avoidance is a crime of opportunity. Opportunity not only in terms of the service being available to you but also the unequal distribution of wealth. Those with massive wealth have the opportunity to avoid taxes,” he said.

“Poor people want to pay taxes because it is a question of self-reliance, but when they become rich, they don’t want to because a facility is available to them.”

According to the survey, tax avoidance is culminating in far reaching consequences including a heavy tax burden on the poor and bloated public debt as government turns to loans to fill the gaping revenue hole.

While the Kenya Revenue Authority (KRA) has pushed to expand the tax base with a view to add two million new tax payers by the end of 2022, Wanyama says the solution lies in trailing tax avoidance and pushing for tax compliance.

“Revenue authorities know that chasing after small businesses costs more than actually taxing the right people and forcing them to comply,” he added.

The new survey comes on the backdrop of the revelation from the Pandora Papers which showed hundreds of public servants had funds stuck offshore.

While this holdings are yet to be deemed illegal, the stash of foreign wealth has closely been tied to tax avoidance/evasion.

The survey was carried out between June 24 and 28 this year and involved 1525 respondents.