The Finance Bill 2018, which was approved by President Uhuru Kenyatta on September 21, has introduced a 1.5 per cent mandatory levy on a worker’s gross salary with a monthly maximum deduction of Sh2,500 for individuals earning a basic salary of Sh166,000 and above.
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 monthly maximum of Sh5,000 for high income earners, with employers contributing a similar amount to the fund.
The deductions put at an estimated Sh55 billion a year will go into the soon-to-be-established National Housing Development Fund and will be accessed through a tenant purchase scheme for those in the low-cost housing bracket.
It can also be securitised for mortgages for those with high incomes.
The contribution can also be used as a deposit when a worker wants to bargain a mortgage or interest rate buy-back to make the mortgage cheaper.
On August 29, lawmakers rejected the proposal saying it would cause 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 every month to the 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 all monies received would be used carefully and that individual contributions would be used as a guarantee for the houses.