Africa-Press – Kenya. The introduction of the Housing Levy in the disputed 2023 Finance Act with the expectation to drive up job opportunities, mostly in the informal sector is not the actual case, tax lawyers now say.
Housed under Cliffe Dekker Hofmeyr (CDH), the group of tax experts including lawyers and practitioners, say the move by the government to impose the levy which was effective from July 1, will pile more pressure on employers.
Employers are already grappling with the rising inflation and high costs of doing business, amid the rising interest rates and the weakening shilling against the dollar.
“Having to remit the 1.5 per cent contribution for each employee in the current economic space, adding more people in the employee basket is going to be a tough choice for employers,” said Alex Kanyi, partner in the tax and exchange control, dispute resolution, and corporate practice at CDH.
He was speaking during a media roundtable briefing in Nairobi. Further depicting the levy’s unclear intent apart from the projected job creation, Kanyi says the fund was initially described as a contribution, where those who are non-eligible to get houses were promised to get a refund after seven years.
“The proposal turned out to be a tax in the Act, with no privileges of refund. Therefore, it’s still under unclear circumstances whether the levy will really fulfill one of its primary mandates of job creation.”
The fund was also sought to provide capital for the development of affordable housing and associated social and physical infrastructure, as well as the provision of affordable home financing to Kenyans.
It is to be contributed by employers at the rate of 1.5 per cent of the employee’s monthly gross salary and by employees at the rate of 1.5 per cent of the employee’s gross monthly salary.
Apart from the uncertainty in job creation, the practitioners also say the provision will lead to an increase in statutory deductions by an employer to an employee’s wages.
“It will also be painful for salaried earners because their disposable income will be slashed,” Kanyi said.
He further reiterated that for the government to spur its economy through increased tax revenues, there should be a robust mechanism that will seek to enforce the existing tax laws and avenues.
This while wooing more people into the tax net without necessarily increasing taxes or creating more tax channels. “Proper enforcement could propel the government’s revenue collection to Sh2.9 trillion compared to the targeted Sh2.5 trillion in the current Financial Year,” Kanyi said.
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