President William Ruto on Tuesday summoned Kenya Kwanza Alliance leaders to State House, Nairobi and appealed to them to support the proposed housing levy in the Finance Bill, 2023 that has attracted opposition.
The President who, according to the sources, read the riot act to some leaders, oversaw the group being taken through the policy behind the Housing Fund so that they can understand it before talking about it to the public or the media.
Ruto reportedly told the leaders how he placed a call to Mathira MP Eric Wa Mumbi after he appeared in the media vowing to vote against the Bill. “He asked us to first understand the Bill before giving our view about it and required us to educate our people about the Bill instead of joining our rivals to oppose it,” an MP told The Standard.
On May 10, Wa Mumbi, who succeeded Deputy President Rigathi Gachagua in Mathira constituency said: “I will not be supporting the taxes proposed in the Finance Bill. Hatuwezi finyilia mwananchi mwenye amefinyika (we can’t overburden the ordinary Kenyan). As a responsible Member of Parliament, I will stand with the people.”
Principal Secretary in the State Department of Housing and Urban Development Charles Hinga took the MPs through the idea behind the Housing Fund, where he explained that the three per cent housing levy had been capped at Sh2,500.
Hinga explained to the legislators that as opposed to the popular belief that the three per cent proposal was a general levy, it will be either the three per cent or Sh2,500 or whichever is lower.
“This means that if a person gets a salary exceeding a deduction of Sh2,500, he or she will still contribute Sh2,500,” Murang’a Senator Joe Nyutu told The Standard.
According to Nyutu, the Housing Fund was more of a savings scheme where one will be allowed to access his savings after seven years.
“The PS informed us that a board of trustees akin to that of the National Social Security Fund (NSSF) will be formed to manage the savings of Kenyans where the government can borrow from it in the form of Treasury Bills and bonds,” he said.
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Employment Act
He said the government projects to get Sh9 billion in the next financial year to inject into housing construction. In a half an hour presentation, Hinga explained to the MPs that on the controversial proposal, an amendment to the Employment Act of 2007 will be done to provide for 35 per cent income tax on all monthly salaries above Sh500,000.
This according to Hinga, implies that if a person earns Sh600,000, only Sh100,000 will be committed to 35 per cent Pay As You Earn (PAYE).
Mukurweini MP John Kaguchia said they were also taken through the government’s plan to amend the debt anchor in the Public Finance Management Act to revert to basing debts on 55 per cent of Gross Domestic Product (GDP) instead of basing it on absolute figures of Sh10 trillion.
“From the expert’s presentation, even leaders who were against the Bill understood the President’s agenda that we must swallow the bitter herb to turn around the economy,” Kaguchia said.
The Head of State promised to approach the teachers’ unions in a bid to woo them to drop their hard-line position and support the Bill, which he said was a blessing in disguise since it was preparing the room for salary increase.
“The money that will be deducted by the employer will go into the basket of the employees and this serves as a salary increment,” the Head of State told the leaders.
While addressing the threat of employers downsizing over the housing levy, the President downplayed the issue saying victims will be absorbed in the construction sector.
The move by the government to “demystify” the Finance Bill, 2023 comes at a time when the opposition, the lobby groups and the church have criticised the government for imposing new taxes on the already overburdened Kenyans.
First in the line to oppose the Bill was the Anglican Church of Kenya (ACK) bishops who asked the government to review tax proposals.
The bishops complained that the majority of Kenyans cannot afford any tax increase due to the harsh economic times and that the Bill should be subjected to public participation before being presented to Parliament.
“With the high rise in unemployment and poverty levels, Kenyans are struggling to make ends meet, businesses are struggling, families are breaking down and economic hardships contributing to high cases of mental illnesses, depression and even loss of lives,” the bishops said in a statement that was read by ACK Archbishop Jackson ole Sapit.
Other than the Finance Bill, 2023, other issues discussed in the training that started at 7:30 and ended at 3pm included the Hustler Fund and the cleaning agenda.
The Head of State promised to summon the leaders again in two weeks to discuss his ambitious National Health Insurance Fund agenda.
Other leaders who attended the meeting included Deputy President Rigathi Gachagua and Prime Cabinet Secretary Musalia Mudavadi.
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