The Kenyan government could save billions of shillings by reducing excessive travel allowances paid to civil servants, the World Bank has said in its latest Public Finance Review.
The report argues that Kenya’s huge public wage bill is not fueled by basic salaries, but by complex, unregulated allowances.
Additionally, the World Bank explained that Kenyan civil servants on official trips to the United States cost taxpayers an average of USD 513 (Ksh67,000) per day. This includes per diem and accommodation.
This amount could, however, be slashed if the government used standard rates for per diem and accommodation from Ministries, Departments, and Agencies (MDAs) across all job groups.
According to the World Bank, the cost could drop to USD 326, saving USD 187 (Ksh24,000) per day per officer and roughly Ksh2 billion annually.
By applying the United Nations Development Program (UNDP) daily allowance rates, the cost per officer would drop to USD 460, still translating to a daily saving of USD 53 per person.
Further, the multilateral lender noted that Kenya’s public sector travel budget is currently at Ksh19.6 billion, proposing a 50% cut to reduce unnecessary expenditure.
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Kenyan Taxpayers Losing Billions on Payrolls and Ghost Workers
The exaggerated travel perks are only part of the bigger problem, according to the World Bank.
The report highlighted further inefficiencies in the public payroll system. For instance, Ksh5.38 billion could have been saved between 2019 and 2023 by eliminating ghost workers from payrolls.
On the other hand, Ksh3.35 billion was lost through irregular travel claims.
On the other hand, Kenya lost millions more due to overpayments, unexplained salary variances, and outdated allowance structures
Consequently, the Bank is calling for a two-year hiring freeze, a skills audit, and redeployment of existing staff across government departments to stop the financial crisis.
Also Read: 125 Kenyans Own Twice More Wealth Than Half the Population-Report
World Bank on How to Fix Kenya’s PAYE System?
The report also flags flaws in Kenya’s Personal Income Tax (PAYE) system, noting that it is not progressive enough.
According to World Bank, Kenya should introduce a 15% tax band for annual incomes between Ksh288,000 and Ksh388,000.
Also, the report proposes a 38% tax rate for those earning over Ksh9.6 million per year, and the removal of the current 30% band and for fairer taxation.
It also recommends exempting low-income earners, those earning less than half the average wage, from the Housing Levy.
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