The Employment Act of 2007 is set to be reviewed by the National Treasury to include a 35% income tax on any monthly earnings over Sh500,000.
Last year, President William Ruto revived a proposal to impose higher taxes on wealthy and high-income earning Kenyans.
In his first address to the House, the President said that his administration would prefer to levy taxes from the money amassed by the wealthiest Kenyans than from workers and traders.
It would apply to all properties such as real estate, cash, investments, business ownership, and other assets, less any debts.
“The economic principles of equitable taxation require that the tax burden reflects ability to pay. This is best achieved by a hierarchy that taxes wealth, consumption, income and trade in that order of preference. Our tax regime currently falls far short of this,” Dr Ruto said.
“We are over-taxing trade and under-taxing wealth. We will be proposing tax measures that begin to move us in the right direction,” he said.
A copy of the Finance Bill 2023, indicates that Treasury is also seeking to deduct 3% of every employee’s basic pay for the National Housing Development Fund.
The employer will match this deduction with an additional 3%. Employee housing deductions are capped at Sh5,000.
The Bill states that employees who meet the requirements for affordable housing will have their contributions accrue and be used to pay for a house under the government’s affordable housing program.
Treasury is recommending three potential outcomes, for those who are not qualified for the affordable housing program:
- The first is that they be allowed to transfer their accrued contributions to their retirement scheme.
- The second is that they be allowed to transfer the same to a person eligible for the affordable housing programme.
- The third is that they be allowed to transfer the same to their spouse or children or a dependent.
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