The National Treasury is putting forth an amendment to the Employment Act of 2007, which would implement a 35% income tax on all monthly salaries exceeding KES 500,000. This move is part of an effort to place a larger tax burden on high-income earners, as seen in a copy of the Finance Bill 2023 obtained by The New York Times.
Additionally, the Treasury proposes a 3% deduction from all employees’ basic salaries, directed towards a National Housing Development Fund. Employers would match this contribution with an additional 3%. However, the housing deduction for employees is capped at KES 5,000.
Geoffrey Kaituko, the State Department for Labour Principal Secretary, explained that employees eligible for affordable housing could utilize these accrued contributions to finance a house under the government’s affordable housing plan.
For those not eligible for the program, the Treasury suggests three potential outcomes for the accrued savings after seven years or upon retirement, whichever comes first:
- Transfer their accrued contributions to their retirement scheme.
- Transfer the contributions to an individual eligible for the affordable housing program.
- Transfer the contributions to their spouse, children, or a dependent.
A final option allows employees to withdraw their contributions in cash, provided that the amount is included in their taxable income.
These proposals emerge as President William Ruto confronts challenges in fulfilling his key promises to the Kenyan people, while simultaneously reducing the country’s reliance on debt. Ruto recently revived a proposal to impose higher taxes on Kenya’s wealthiest individuals and high-income earners, endorsing a wealth tax that failed to pass through Parliament over the previous four years.
In his inaugural address to Parliament last year, Ruto stated that his administration would prioritize raising taxes from the wealth accumulated by the richest Kenyans, rather than targeting revenues from workers and traders.