Blow for Workers as Uhuru Raises Housing Tax by 200%

Salaried workers will part with 1.5 per cent of their pay to finance a new housing fund after President Uhuru Kenyatta restored and raised a levy that legislators had earlier rejected.

President Kenyatta’s suggestion is 200 per cent higher than Treasury’s proposal that introduced a 0.5 per cent mandatory levy on a worker’s gross pay with a maximum of Sh5,000 for high-income earners, with employers contributing a similar amount to the fund.

Treasury was seeking to raise Sh57 billion annually from workers to finance the proposed National Housing Development Fund, which is meant to help the government realise its goal of delivering 500,000 affordable housing units countrywide in five years.

On August 29, lawmakers rejected the proposal saying it would cause a huge cost burden to companies while hurting Kenya workers.

However, in a memo to MPs on Tuesday, President Kenyatta reinstated the tax proposing to have every worker pay to the housing fund “1.5 per cent of the monthly basic salary”.

This means a worker earning a gross salary of Sh100,000 will contribute Sh1,500 monthly to the fund – up to a maximum of Sh2,500 for individuals with salaries of Sh166,000 and above.

Treasury had proposed that employees on a basic salary of Sh100,000 would contribute Sh500, up to a maximum of Sh5,000 for individuals earning Sh1 million and above.

The latest proposal is likely to upset workers unions and employers, who had termed the proposed levy a burden to an overtaxed workforce.

RELATED: Explainer: What is the Kenya Housing Fund?

Workers and their employers said the statutory kitty was likely to be misused since the government had resolved to eject their representatives from the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF).

“The National Housing Development Fund remains an amorphous entity where neither worker’s nor employer’s representatives have been briefed. Such funds need supervision to ensure workers benefit to the last penny,” Cotu Secretary General Francis Atwoli said.

However, the State has defended the fund’s integrity saying that monies received would be used carefully and that individual contributions would be used as a guarantee for the houses.

Join 15,000+ pros getting our weekly digest of news and insights.