New fees for national housing scheme hit Kenyan taxpayers hard New fees for national housing scheme hit Kenyan taxpayers hard

New fees for national housing scheme hit Kenyan taxpayers hard
04 Oct 2018

New tax policies introduced by Kenya’s president will see employees’ take-home salary fall as they start contributing 1.5% of their gross pay towards a National Housing Development Fund.

President Uhuru Kenyatta hopes the move will help him realise his dream of building half a million new houses by 2022.

But the employee contribution comes on top of other statutory deductions relating to Pay-As-You-Earn (PAYE), the National Social Security Fund (NSSF) and National Hospital Insurance Fund (NHIF), which have significantly eaten into their wages. The costs of other critical items such as fuel, mobile phone airtime, internet data bundles and mobile money transfer services have also increased significantly since Kenyatta signed the Finance Bill into law.

Samuel Nyandemo, an economics lecturer at the University of Nairobi, told Standard Digital: "What he has done is drastically reduce people’s income. This has compromised the purchasing power of the majority of Kenyans."

A typical employee with a gross salary of Sh50,000 (US$495) will be left with a net salary of Sh39,637 (US$393), after Sh7,332 (US$73) is deducted for PAYE, Sh1,080 (US$11) for NSSF, Sh1,200 (US$12) for NHIF and Sh750 (US$7) for the housing kitty.

But the fear is that, because employers are also being required to match their employees’ contribution of 1.5% of gross salary into the housing fund, few will have the capacity to increase wages, recruit new workers or even expand their businesses. Official unemployment, which currently stands at 32%, could rise sharply.

Consumer Federation of Kenya Secretary General Stephen Mutoro said: "These tax measures have the impact of escalating the cost of doing business. Firms will thus be forced to over-price their products so as to break even."

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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New tax policies introduced by Kenya’s president will see employees’ take-home salary fall as they start contributing 1.5% of their gross pay towards a National Housing Development Fund.

President Uhuru Kenyatta hopes the move will help him realise his dream of building half a million new houses by 2022.

But the employee contribution comes on top of other statutory deductions relating to Pay-As-You-Earn (PAYE), the National Social Security Fund (NSSF) and National Hospital Insurance Fund (NHIF), which have significantly eaten into their wages. The costs of other critical items such as fuel, mobile phone airtime, internet data bundles and mobile money transfer services have also increased significantly since Kenyatta signed the Finance Bill into law.

Samuel Nyandemo, an economics lecturer at the University of Nairobi, told Standard Digital: "What he has done is drastically reduce people’s income. This has compromised the purchasing power of the majority of Kenyans."

A typical employee with a gross salary of Sh50,000 (US$495) will be left with a net salary of Sh39,637 (US$393), after Sh7,332 (US$73) is deducted for PAYE, Sh1,080 (US$11) for NSSF, Sh1,200 (US$12) for NHIF and Sh750 (US$7) for the housing kitty.

But the fear is that, because employers are also being required to match their employees’ contribution of 1.5% of gross salary into the housing fund, few will have the capacity to increase wages, recruit new workers or even expand their businesses. Official unemployment, which currently stands at 32%, could rise sharply.

Consumer Federation of Kenya Secretary General Stephen Mutoro said: "These tax measures have the impact of escalating the cost of doing business. Firms will thus be forced to over-price their products so as to break even."

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Minding your manners in Africa

Kenyans risk 'serious consequences' for failing to file tax returns

Africa: Land of opportunity and challenges

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