Government Makes Three Changes in Housing Fund as Storm Heats up

Saturday, June 10, 2023 –After immense pressure over the housing levy on working Kenyans, Government has now come up with atleast three key changes that would help calm the taxation storm.

National Assembly Finance Committee, on Friday, June 9, proposed enacting a legal framework that will help safeguard the interests of contributors to the housing kitty which makes one of the William Ruto’s legacy programmes.

With a clear and understandable roadmap, Kenya Kwanza administration is seeking to have convincing case on the Bill when its next reading takes place in Parliament.

Appearing before the Finance Committee, Housing Principal Secretary Charles Hinga intimated that the Ruto’s government had proposed two changes to the fund, including non-withdrawal of employer contributions and taxation of withdrawals.

PS Hinga indicated that the contributors could withdraw their salary deductions and those of their employers together after seven years.

“The employer portion can be withdrawn together with that of the employee at the earlier stage of seven years or retirement,” Hinga clarified in new changes.

He also stated that government will not be taxing any withdrawal made in seven years saying this process will be highly participatory.

“Withdrawal in seven years will now not be taxed. It’s a very participatory process,” Hinga explained debunking their earlier assertion that employer’s contribution remains in the fund for 14 years.

Contributors were also to be taxed when making withdrawals, with the government explaining that the change was informed by the fact that the contribution would not be taxed at the salary deduction stage.

However, the government had indicated that those transferring their contributions to the retirement scheme would avoid taxation.

“The money is a saving and not a tax as initially proposed. If you could have earned the money, you would have paid tax. That means you did not pay the tax for the seven years,” the PS stated then.

Notably, the proposals are set to be discussed by the committee, which will retreat over the weekend to discuss contentious clauses in the Finance Bill 2023, including proposals made by various worker unions and employers during its hearings.

Some of the other notable proposals being considered include the reduction of deduction from 3 per cent to 2 per cent.

Should this Bill happen to go through, government will start these deductions from July 1.