The effect of income distribution in taxation has grown significantly.
Broad taxes such as value added levies on goods and services may place a higher tax burden on the average income earner.
Workers earning high salaries will be made to pay increased taxes if Parliament adopts proposals to raise the country’s revenues in the next financial year.
The proposals are part of recommendations given to parliament ahead of the start of the budgeting cycle by a group of policy and budgeting experts.
The report by the Parliament Budget Office says that while salaries have gone up over the years, the growth has been unequal and had only favoured the high earners.
The pay-as-you-earn (PAYE) amounts deducted from salaries have not changed and those pocketing high incomes have ended up paying a lesser tax proportion to the salaries, the report says.
COST OF LIVING
To reverse the trend, the experts are proposing the adoption of progressive taxes, a model which takes a larger percentage of salary from high-income groups than from the low-income ones and is based on the ability to pay.
“Urban centres are more unequal than rural areas. While Nairobi accounts for a big proportion of the value of consumption of goods and services relative to other areas in Kenya, it is the most unequal with average consumption of the higher income earners at least 600 times more than that of lowest earners,” the report says.
“Kenya is considered relatively unequal with a Gini Coefficient (measure of income inequality) of 0.45 to 0.47 according to various studies.”