KRA readies system to collect housing tax billions starting July

Times Tower in Nairobi, the headquarters of Kenya Revenue Authority (KRA). FILE PHOTO | DENNIS ONSONGO | NMG

By BONFACE OTIENO More by this Author

The Kenya Revenue Authority (KRA) has modified its automated tax payment system, iTax to allow it to collect the controversial housing tax weeks before

Parliament passes the Finance Bill.

The taxman has modified the P10 Form that is normally used to file PAYE [Pay-as-You-Earn] on a monthly basis to enable it to receive the tax.

Read: KRA given Sh1.2bn to hire spies in hunt for tax cheats

This means that should President William Ruto assent to the Finance Bill, and the tax is passed in the third reading, employers will start deducting and remitting it effective July 1, 2023.

Nikhil Hira, a tax expert based in Nairobi, says that the taxman is simply preparing to start collecting the tax that is unpopular with workers and employers.

“KRA has been slow in changing the iTax and this time around they simply want to be proactive,” said Mr Nikhil.

“Remember the tax will still go through the third reading and they are simply preparing grounds as they await to start receiving it.”

The proposed statutory deduction adds to the tax burden on employed Kenyans who are struggling with the rising cost of living amid a freeze on salary increases and employment by Kenyan employers.

The policy, which was first mooted and rejected during President Uhuru Kenyatta’s second term, will see employers contribute to the fund, adding to the cost of doing business in the country.

Treasury had initially proposed changes to the Finance Act to allow the deduction of three percent from employees' basic pay to help fund President Ruto’s ambitious plan to build low-cost homes.

However, to appease taxpayers, the parliamentary committee has reduced the contribution from the proposed 3.0 percent to 1.5 percent, but shifted it into a tax, which will now be collected by KRA alongside other levies.

Dr Ruto’s administration wants to build houses as part of his bottom-up economic model, arguing that it will provide houses to those living in slums and create employment through the construction of 250,000 houses annually.

Read: No housing levy refunds in revised President Ruto tax plan

Critics, however, say that the contribution will reduce the take-home salary for employees who are already grappling with inflationary pressures.

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