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The government is waiting for private companies to remit Value Added Tax (VAT) so that it can raise the money it needs to pay delayed salaries for civil servants and county employees.

Whereas some civil servants — such as police officers and teachers — received their salaries early this week, many of their counterparts — who will be paid in the second batch — are still waiting for their banks to notify them that the pay has been deposited.

Sources told the People Daily that the government reached out to big companies — through the Kenya Association of Manufacturers and the Kenya National Chamber of Commerce and Industry (KNCCI) — to ensure that their members remit VAT on time so that the money can be used to pay civil service salaries.
Earlier in the week, President William Ruto said the government would not take loans to pay salaries.

Public holiday

Last week, companies were whipped to remit Pay As You Earn deductions (PAYE) before the Easter holidays, which started on Friday and ended on Monday this week. Many of the companies complied and remitted the deductions by Thursday.

The deadline for PAYE remittance is the 9th day of every month but since it was falling on a public holiday this year, companies were asked to remit the money by 6th. This was the money used to pay the first batch of civil servants, who included Members of Parliament.

The second batch will be paid using VAT remittances. According to the Kenya Revenue Authority (KRA) Act, companies are required to make their VAT payments on or before the 20th day of the following month.

This includes both the returns and payment. VAT returns are submitted online via iTax. This remittance is due Thursday next week and with the next day likely to be Idd-il-Fitr, there is pressure to have the companies pay in time so that civil servants can be paid before the end of the holy month of Ramadhan celebrated by Muslims.

Besides parliamentary staff, who received their pay this week, select civil servants were also paid. This was made possible after employers remitted PAYE deductions.

According to the Employment and KRA Acts, every employer is obligated to deduct PAYE from their employees’ salaries and wages at the prevailing rates and remit the same to KRA on or before the ninth day of the following month.

Counties struggling

Since April 9 was falling on a Sunday, and Friday was a holiday, the government encouraged employers to remit PAYE latest by close of Thursday, April 6, which enabled it to collect some revenue and remit part of the delayed salaries by Tuesday, April 11. Depending on their banks, some of the civil servants received their pay the same day.

However, thousands of public servants are yet to receive their March salaries and some county government workers are owed up to three months’ worth of pay. Counties are also yet to receive their share of revenue from the national government, thus constraining their operations.

Due to the delays, hundreds of thousands of public sector workers spent their Easter holiday without disposable income and the government is racing against time to ensure they do not get to Idd-if-Fitr before they are paid.

Members of Parliament and parliamentary staff were in the first lot of people who were paid between Thursday last week and Tuesday this week.

Revelations of the strategy adopted by the government to meet the civil servants’ salaries came in the wake of President William Ruto’s public resolve that his administration will not borrow to fund civil servants’ salaries despite strike threats by a section of workers, including those in the health sector, who were among the first to give a strike notice, which expires on Wednesday next week.

All pointers indicate that the crisis may persist for months, as National Treasury Cabinet Secretary Njuguna Ndung’u — currently in the US for talks with IMF and World Bank officials —warned of tough times ahead, saying the government is in a “financial fix” but they were doing their best to overcome the fiduciary challenges.

Admitting that the government had no money, Deputy President Rigathi Gachagua this week blamed the Jubilee administration’s “big appetite for loans” for the current crisis. He also accused long-time opposition leader Raila Odinga of being complicit in precipitating it.

“They borrowed money left, right, and center… Because we are a responsible government, we have to pay this money,” Gachagua said on Sunday.

Meanwhile, governors have protested at failure by the Treasury to release money to counties for the fourth consecutive month since December. By end of March, counties were owed Sh122.1 billion, with governors blaming the withheld cash for failure to pay county workers’ salaries. Counties are owed Sh29.6 billion for December, Sh31.45 billion for January and February each and Sh29.6 billion for March.
Government officials also said some external debts had fallen due this month, making it necessary for the government to prioritise settling them. According to government sources, this was the genesis of the delayed salaries.

Due to the cash flow crisis, this is the longest that devolved units have gone without receiving their equitable share of revenue from the Treasury.

The cash flow crisis has been made worse by a weakening shilling, which has made Kenya’s dollar-denominated loans more expensive. Matters have not been made easier by the cost of living that has made the lives of Kenyans difficult. Although inflation has stabilised at 9.2 per cent, many Kenyans still consider high cost of basic goods their biggest problem, according to a recent survey by Tifa Research.
Strike threats
Governors have warned that counties could be moving towards paralysis due to the ongoing cash crisis. Subsequently, the Council of Governors (CoG) has asked the national government to urgently address the crisis.

“These unwarranted delays (in releasing funds) have jeopardised the operations of the counties, rendering them unable to pay salaries, suppliers or continue to offer essential services to citizens. We, therefore, request your office to urgently disburse the outstanding balance of equitable share,” CoG chairperson Anne Waiguru said in a letter to CS Njuguna Ndung’u.

Counties last received money from the national government in November last year. Some, where employees are said to have gone for more than two months without pay include Tharaka-Nithi, Kirinyaga, Nyandarua, Marsabit, Murang’a, Laikipia, Kakamega, Bungoma, Busia, Vihiga, Nyamira, Kisii and Kisumu.
Besides county workers, health workers across the country have threatened to go on strike on Tuesday if pending salaries will not have been paid by then.

In a joint statement on Tuesday, the health workers, through their respective unions, said more than 40 counties were yet to either pay healthcare workers or remit statutory deductions.

This, the unions said, makes members miss out on the very services they are offering to patients.
“We find it preposterous that government employees, especially those that provide essential services in the health sector, are continuously inundated with notifications of delayed salary payments and statutory deductions,” said the unions.

The unions that signed the statement were the Kenya Medical Practitioners Pharmacists and Dentists Union (KMPDU), the Kenya Union of Clinical Officers and the Kenya National Union of Nurses.