Taxes: How Capitalism Works 101

Category 1: How Bigshots Earn Money

Rental income tax reduced from 10% to 7.5%.

Dividend income tax at 5%.

Category 2: How Peasants Earn Money

Upto 35% PAYE depending on your tax bracket!!!


That’s the system in a nutshell. By the way, this isn’t only applicable in Kenya. Even in developed nations it works exactly like that. The harder you sweat for your money, the more tax you pay. You get punished by the government for being an employee.


Example:

NCBA CEO earned a gross income of Ksh 147.73 million in 2022 (Clearly not a peasant but an employee nonetheless). He paid PAYE of Ksh 51.7 million (35%). He is a high earning employee.

NCBA major shareholder (Uhunye) earned Ksh 835 million in dividends in 2022. He paid Ksh 41.75 million (5%) in withholding tax. He is an investor.

The largest individual shareholder of the bank paid less taxes than the highest paid employee.

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You have totally ignored the 30% income tax set on companies?

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That’s factored in if you buy shares of an already running company. You calculate earnings per share from the net profit, not gross profit.

For example, if you buy NCBA stock today, you will get a dividend yield of 10.5%. The 30% corporate taxes have already been factored in when you value the company. So, if you didn’t start the company and only came in as an investor later, that 30% is inconsequential because you value the company after deducting it.

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A shareholder is the last person to be paid. And their pay is not guaranteed. They took their taxed income to invest to create income for others including the government. Is why it makes sense to tax them less. If you look at countries that thrive, they strive to tax business people as much as they can.