Salaried Kenyans to take home less pay as MPs endorse Housing Levy
Members of the National Assembly during a sitting on June 7, 2023. Salaried Kenyans are now bracing for lower take-home pay effective July, following the endorsement of the proposed Housing Levy deduction by Members of Parliament on Wednesday night.
Salaried Kenyans are now bracing for lower take-home pay effective July, following the endorsement of the proposed Housing Levy deduction by Members of Parliament on Wednesday night.
In a vote that sent the House into division owing to its contested nature, 184 members voted in favour of the now uncapped 1.5 per cent deduction, matched with another 1.5 per cent contribution by the employer, with 72 voting against the proposal.
The Finance Bill 2023 had initially proposed to introduce the Levy at a 3.0 per cent deduction of an employee’s salary, matched by another 3.0 per cent by the employer before the National Assembly Finance and Planning Committee amended it to 1.5 per cent following the conclusion of public participation.
Contested portion
Clause 76 of the Finance Bill 2023 has arguably been the most contested portion of the Kenya Kwanza government's debut revenue-raising plan, with the Finance and Planning Committee Chairperson, Kimani Kuria, indicating the government targets collecting Sh83.0 billion annually through the deduction which will be channelled to the Housing Development Fund.
“There’s a wrong concept that if you increase the rate of tax you are going to collect more. There are very many people who told us that if you are going to deduct 3.0 per cent, I would rather not be employed, I would rather go and start a small business. We sat down with Treasury and discussed what their projections were for collections at 3.0 per cent and we realized that even after reducing 3.0 per cent to 1.5 per cent we are going to raise Sh83.0 billion per year,” Mr Kimani stated.
Members of Parliament also adopted an amendment on the floor of the house providing that funds collected through Housing Levy deductions would be ring-fenced solely for affordable housing projects with a view to avert any leakage to unintended use.
The deductions are expected to kick off effective the July 2023 pay date.
