Hard work doesn't pay anymore due to high taxes

 

A man pushes a handcart along Mombasa road, Nairobi on June 12, 2024. [Elvis Ogina, Standard]

In Kenya today, the question, “Is it worth it to wake up and go to work?” has taken on a troubling resonance. Our tax system is squeezing everyday Kenyans, pushing more into poverty than ever before. The people are taxed heavily, yet they receive little in return when it comes to essential services like education, healthcare, and food security. This is a critical moment for tax justice advocacy as we confront a deeply flawed system that burdens the working class while the wealthiest remain largely unscathed.

A salaried Kenyan sees up to 49.25 per cent of their gross income disappear in mandatory deductions alone. These deductions come in multiple forms: PAYE (Pay-As-You-Earn), which consumes 35 per cent of the gross salary; NSSF, recently increased to 6 per cent; Pension, set at 4 per cent; NHIF (health insurance) at 2.75 per cent; and Housing Levy, adding 1.5 per cent of gross income to the bill. This leaves a Kenyan worker with only 50.75 per cent of their gross income. But it doesn’t end here. The tax system continues to creep into every aspect of daily life, forcing Kenyans to pay more for basic needs while further whittling down their earnings.

Once deductions have already halved a Kenyan’s income, Value Added Tax (VAT) steps in to further reduce the purchasing power. The recommended budgeting rule suggests a 50/30/20 split (50 per cent) for essentials, 30 per cent for discretionary spending, and 20 per cent for savings). For most Kenyans, essentials alone gobble up about 50 per cent of their net pay, meaning that 80 per cent of their income goes into essential and discretionary spending combined. On these expenditures, a 16 per cent VAT applies, taking another 6.5 per cent of the gross salary.

So, when you add up all these deductions and taxes, a staggering 55.75 per cent of a Kenyan’s gross salary is funnelled into taxes and VAT. A working Kenyan is left with barely 44.25 per cent of their original earnings, which must stretch to cover all their needs and any aspirations they may hold for financial stability or growth.

What makes the taxation nightmare even harder to stomach is how the government allocates the revenue it collects. Approximately 70 per cent of the revenue goes to service the national debt, leaving a mere 30 per cent to cover all other government functions, including public services. While healthcare and education crumble under the weight of underfunding, Kenyans are left wondering why they bear such a high tax burden when so little is invested back into their well-being.

It’s galling to see these funds directed more toward debt servicing than to improve public services, which are supposed to be the bedrock of a functional society. Schools are under-resourced, public hospitals struggle with shortages of staff and essential supplies, and food insecurity remains a pervasive issue in both rural and urban areas. For many Kenyans, the vision of a “tax for progress” has morphed into “tax for survival”—but only for the government, not for its citizens.

This system has created a paradox where those who earn less, pay more. For the super-wealthy and powerful, loopholes and exemptions are readily available, and investment returns are often taxed at lower rates or not at all. In contrast, middle-and low-income earners, who rely solely on their salaries, are taxed at every turn with no relief in sight.

When 55.75 per cent of income is funnelled into taxes, it’s not difficult to see why so many Kenyans are questioning the value of hard work.

Mercy Mutai is a Media and Communication Consultant