Teachers’ shock as KRA demands extra tax

The Government is demanding about Sh9,000 from every teacher who marked Kenya Certificate of Secondary Education (KCSE) exams last year out of the Sh30,000 pay they received.

The 14,000 teachers hired by the Kenya National Examinations Council (Knec) to mark the KCSE scripts last year were paid via mobile money and now the Kenya Revenue Authority (KRA) says they did not pay taxes for the ‘side hustle.’ This is despite Knec having withheld five per cent of the pay as tax remitted to KRA.

Teachers who tried to file their tax returns were shocked to get a demand from the taxman that they have to settle the amount deductible for consulting with the Knec.

According to a message circulating within teaching circles, the teachers are being told to settle the bill in cash, which may soon start attracting penalties if not paid to KRA.

Big challenge

“Knec deducted and submitted 5 per cent instead of 30 per cent, you have to pay the balance of slightly over Sh8,000 to KRA in cash before April 30. It is official communication,” noted one of the affected teachers.

An examiner who spoke to Saturday Standard said they had received a demand for Sh9000 and said it would be a big challenge to meet the shock payment.

“Why did they have to wait until all the money was spent or even better,” said the examiner.

Teachers spend at least two weeks hoarded up in student dormitories before Christmas trying to beat tight government schedules to mark papers only to have KRA rip almost every penny from their hands.

Grant Thornton Kenya Chief Operating Officer Kunal Ajmera says the amount being demanded is too high for a one off job that does not constitute monthly income.

“Normally withholding tax on professional fees or earnings from consultancy is 5 per cent, 30 per cent seems a bit too high and unusual,” Ajmera said.

The tax expert said Knec must have treated the examiners as consultants. When someone pays a consultant who is resident professional fees above Sh24,000 in a month he is required by law to deduct tax at 5 per cent.

However he noted there are ways they can pay next to nothing if they played their cards well and calculate expenses into the KRA demand.

Withholding tax is an advance tax against which you get a credit to be deducted from your total tax for the year on taxable income received.

“In the example for the examiners, Knec would have deducted 5 per cent from the Sh30,000 amounting to Sh1,500. If the examiner did not have any other income for the past year they would be required to pay a further Sh7,500 on or before April 30,” Ajmera said.

“However, the same the examiners would also be allowed to deduct expenses which were incurred in generating that income. This would include but not limited to transport, stationery etc,” he said.

If the same examiner paid expenses for transport and stationery amounting to Sh10,000 then his taxable income would be Sh20,000. Tax at 30 per cent would then be Sh6,000 leaving the examiner with a debt of Sh4, 500 when you consider the Sh1,500 withholding tax credit already with the taxman

Teachers say that this is a new charge since they always get paid the same amount after KNEnec deducts taxes.

“The pay usually delays up to the end of first time, this time they paid early through M-Pesa when we were leaving, so are we being penalized for getting the money early,” the source said.

To add to the confusion, the teachers’ union noted that the teacher’s pay for marking exams should have initially been taxed as an income.

Kenya union of Post Primary Teachers (Kuppet) secretary general Akelo Misori said there may have been an oversight by Knec, which should have deducted all necessary taxes and remit to KRA. He noted there has never been an instance where KRA has come asking teachers to pay additional taxes.

“For all income, taxable amount should be 30 per cent unless it is VAT,” he said.

“KRA should consider temporary waiver and demand the taxes in the next schedule of marking. It is a shocker for the teachers and also not procedural to be charged taxes in such a manner. We will write to KNEC asking them to stick to tax laws and also to KRA to ask them to consider putting it on the next exam marking cycle,” said Misori.