The President of Kenya, William Ruto, has formally signed a contentious bill into law, creating a path for the government to continue collecting a housing levy of 1.5% of a worker’s monthly pay. The signing ceremony was conducted in State House Nairobi and attended by key government officials.
The primary goal of the levy is to finance the building of affordable housing for low-income individuals although the implementation has drawn criticism from a wide range of sources. Many in the public and those in opposition have voiced their displeasure with the tax, seeing it as just one more tax among many others.
Legal obstacles have already prevented the bill from becoming law, with a judge stopping deductions because of insufficient legal support. Last Monday, members of Parliament changed and approved the bill despite protests from opposition politicians.
The tax was first proposed in President Ruto’s agenda for the 2022 election. It is a component of a larger financial bill that was passed in June of last year, along with a doubling of the fuel sales tax. A higher health insurance premium is also scheduled to be implemented shortly.
The administration argues that increasing tax receipts is necessary to reduce the budget deficit and pay for necessary public services.
Since last July, the government has been withholding the 1.5% housing charge from employees’ pay. But in the face of widespread outrage, one activist successfully sued the government, claiming that it had unfairly targeted Kenyans employed in the formal sector and receiving regular monthly pay.
The new law now extends the tax to additional workers and mandates that non-salaried Kenyans working in the informal sector pay the levy in order to meet the concerns brought up by the court. In addition, the new law created the Affordable Housing Fund, whose purpose is to oversee the funds the government would receive from the levy.
According to the authorities, the money that would have been paid if the plan had not been suspended would not be included in the deduction retroactively.
President Williams Ruto plans to generate over 600,000 jobs annually and build 200,000 affordable housing units.
