@BusinessDaily

Rotich admits housing fund tax error in budget

6 months ago, 20 June 03:00

By: Charles Mwaniki

Kenyans in formal employment will not contribute one per cent of their pay to the housing development fund as indicated in the Finance Bill, but will instead pay 0.5 per cent, Treasury secretary Henry Rotich said on Tuesday.

The CS described the one per cent charge to the fund contained in the Finance Bill as a typographical mistake that will be corrected as it goes through Parliament.

“The right rate is the one in the Budget statement. The error will be dealt with in Parliament, where we will harmonise what is in the Bill and what is in the Budget speech,” the minister said, adding that the proposal that came from the Ministry of Housing was five per cent, which “the Treasury thought was too high.”

Mr Rotich had pegged the levy at 0.5 per cent of an individual’s pay in his Budget statement -- to be matched by a similar contribution from employers up to a maximum of Sh5,000 -- but the Finance Bill doubled the rate to one per cent, causing an uproar among those in formal employment.

If Parliament passes the Bill without correcting the mistake, Kenyan workers will have to pay the higher levy that also significantly adds cost burden to employers.

The State Department of Housing announced two months ago that it was finalising regulations to operationalise a housing development fund, whose finer details are yet to be released.

This is the first time that the Housing ministry is establishing the fund that has been lying dormant in the Housing Act for decades.

Its implementation means an employee earning Sh100,000 will contribute Sh500 every month to the fund – up to the maximum Sh5,000 for those earning Sh1 million and above.

The Finance Bill has also introduced amendments to the Central Bank of Kenya Act to include regulation of mortgage refinance companies. The move paves the way for the establishment of state-backed Kenya Mortgage Refinancing Company that is to address the demand side of the housing market by offering liquidity to the mortgage industry.

Mr Rotich did not offer details on how the fund will be managed but said those contributing to the fund will have priority over non-contributors in accessing the completed housing units.

“In terms of priority, the first ones in line to get the affordable housing will be the contributors. This is how it works in other countries… we will thereafter determine whether the contributors will access (the houses) on first-come-first-served basis or use a lottery system as it happens in Ethiopia,” said Mr Rotich.

The new levy, which comes at a time when Kenyans are about to be hit with a raft of other tax increments in VAT and excise duty, is expected to face stiff opposition from unions and employers, who consider it an additional tax burden.

Companies with large turnovers are set to pay a higher tax rate of 35 per cent on all income above Sh500 million, while for employees, basic food items and petroleum products are in line for VAT charges due before the end of the year.


Read More


Category: business news corporate economy lifestyle markets opinion

Suggested

14 hours ago, 18:05
@BusinessDaily - By: Patrick Alushula
Lobby sees revenue loopholes in treaties

East Africa Tax and Governance Network says double taxation agreements (DTAs) between Kenya and other countries come with little disclosure and may be exposing the country to tax leakages. ...

Category: business news opinion
14 hours ago, 18:05
@BusinessDaily - By: Charles Mwaniki
Treasury back in market for Sh14bn after initial bond flop

The Treasury is back in the market with a Sh13.8 billion tap sale for this month’s bond issue, after the initial sale was undersubscribed by 28 percent. ...

Category: business news opinion
16 hours ago, 16:20
@BusinessDaily - By: Kiragu Kariuki
LETTERS: Goat farming can help tackle food insecurity

Frequency in drought occurrence and climate change have constrained both agricultural and livestock production sectors exposing many households to food insecurity yearly. ...

Category: business news opinion
14 hours ago, 18:06
@BusinessDaily - By: Mwangi Muiruri
Nyandarua in Sh400m potato factory plan

Nyandarua County has set aside Sh400 million for construction of a potato value-addition plant at Shamata. Governor Francis Kimemia said the project will commence in January with a completion date of ...

Category: business news opinion
16 hours ago, 16:20
@BusinessDaily - By: Tom Mulwa,
MULWA: Time to plan for health needs after retirement

Life after retirement comes with special health-related challenges. ...

Category: business news opinion
16 hours ago, 16:20
@BusinessDaily - By: Jenny Lues
LUESBY: Banks need thorough regulation

My youngest son has a bunch of songs he trots out, each for the right moment. ...

Category: business news opinion

@BusinessDaily

Rotich admits housing fund tax error in budget

6 months ago, 20 June 03:00

By: Charles Mwaniki

Kenyans in formal employment will not contribute one per cent of their pay to the housing development fund as indicated in the Finance Bill, but will instead pay 0.5 per cent, Treasury secretary Henry Rotich said on Tuesday.

The CS described the one per cent charge to the fund contained in the Finance Bill as a typographical mistake that will be corrected as it goes through Parliament.

“The right rate is the one in the Budget statement. The error will be dealt with in Parliament, where we will harmonise what is in the Bill and what is in the Budget speech,” the minister said, adding that the proposal that came from the Ministry of Housing was five per cent, which “the Treasury thought was too high.”

Mr Rotich had pegged the levy at 0.5 per cent of an individual’s pay in his Budget statement -- to be matched by a similar contribution from employers up to a maximum of Sh5,000 -- but the Finance Bill doubled the rate to one per cent, causing an uproar among those in formal employment.

If Parliament passes the Bill without correcting the mistake, Kenyan workers will have to pay the higher levy that also significantly adds cost burden to employers.

The State Department of Housing announced two months ago that it was finalising regulations to operationalise a housing development fund, whose finer details are yet to be released.

This is the first time that the Housing ministry is establishing the fund that has been lying dormant in the Housing Act for decades.

Its implementation means an employee earning Sh100,000 will contribute Sh500 every month to the fund – up to the maximum Sh5,000 for those earning Sh1 million and above.

The Finance Bill has also introduced amendments to the Central Bank of Kenya Act to include regulation of mortgage refinance companies. The move paves the way for the establishment of state-backed Kenya Mortgage Refinancing Company that is to address the demand side of the housing market by offering liquidity to the mortgage industry.

Mr Rotich did not offer details on how the fund will be managed but said those contributing to the fund will have priority over non-contributors in accessing the completed housing units.

“In terms of priority, the first ones in line to get the affordable housing will be the contributors. This is how it works in other countries… we will thereafter determine whether the contributors will access (the houses) on first-come-first-served basis or use a lottery system as it happens in Ethiopia,” said Mr Rotich.

The new levy, which comes at a time when Kenyans are about to be hit with a raft of other tax increments in VAT and excise duty, is expected to face stiff opposition from unions and employers, who consider it an additional tax burden.

Companies with large turnovers are set to pay a higher tax rate of 35 per cent on all income above Sh500 million, while for employees, basic food items and petroleum products are in line for VAT charges due before the end of the year.


Read More

Category: business news corporate economy lifestyle markets opinion

Suggested

14 hours ago, 18:05
@BusinessDaily - By: Patrick Alushula
Lobby sees revenue loopholes in treaties

East Africa Tax and Governance Network says double taxation agreements (DTAs) between Kenya and other countries come with little disclosure and may be exposing the country to tax leakages. ...

Category: business news opinion
14 hours ago, 18:05
@BusinessDaily - By: Charles Mwaniki
Treasury back in market for Sh14bn after initial bond flop

The Treasury is back in the market with a Sh13.8 billion tap sale for this month’s bond issue, after the initial sale was undersubscribed by 28 percent. ...

Category: business news opinion
16 hours ago, 16:20
@BusinessDaily - By: Kiragu Kariuki
LETTERS: Goat farming can help tackle food insecurity

Frequency in drought occurrence and climate change have constrained both agricultural and livestock production sectors exposing many households to food insecurity yearly. ...

Category: business news opinion
14 hours ago, 18:06
@BusinessDaily - By: Mwangi Muiruri
Nyandarua in Sh400m potato factory plan

Nyandarua County has set aside Sh400 million for construction of a potato value-addition plant at Shamata. Governor Francis Kimemia said the project will commence in January with a completion date of ...

Category: business news opinion
16 hours ago, 16:20
@BusinessDaily - By: Tom Mulwa,
MULWA: Time to plan for health needs after retirement

Life after retirement comes with special health-related challenges. ...

Category: business news opinion
16 hours ago, 16:20
@BusinessDaily - By: Jenny Lues
LUESBY: Banks need thorough regulation

My youngest son has a bunch of songs he trots out, each for the right moment. ...

Category: business news opinion
Our App