Capital punishment:  The income tax.  ~Jeff Hayes

I'll admit it, I hate paying taxes, moreover income tax. The pain of having to helplessly watch the tax collector take a significant part of my hard earned cash drives me crazy, but there's nothing I can do since it's my duty to pay my taxes.

Well I recently set out to investigate how Kenya Revenue Authority (KRA) computes and deducts my taxable income. What I discovered killed my desire to push for a pay rise since it became evident that the pay rise would have less impact on my current financial position.

Kenyans income is taxed on the basis of a graduated scale, meaning that taxable income is grouped into brackets or bands which are then taxed at a specified respective rate.

[caption id="attachment_4359" align="alignnone" width="753" caption="Data collected from KRA"][/caption]

Take for instance you have a gross salary of KES 50,000, this is how the Pay as You Earn (PAYE) tax will be computed:

This gross amount will be grouped into the four brackets and each bracket will be computed against its respective tax rate:

[caption id="attachment_4362" align="alignnone" width="646" caption="Data compiled by author"][/caption]

The tax liability will be (1,016.4+1,436.4+1,915.2+2,394+3,332.1) = KES 10,094.10

The net income will subsequently be (50,000 – 10,094.10) = KES 39,905.9

The above net income is not exclusive of NHIF and NSSF contributions, so the amount is bound to further reduce significantly.

However, the government  offers an annual personal tax relief of KES 13,944 which is only applied to Kenyan residents only. The annual tax liability for the above case is (10,094 x 12)= KES 121,138.80.

Due to the tax cut you will be required to remit (121,138.80 – 13,944) = KES 107,194.8 to KRA

I hope you now understand why I hate the tax collector.