MPs team now slashes housing levy by half

National Assembly’s Finance and Planning Committee has made key amendments to the controversial Finance Bill, among them reducing the proposed three per cent deduction for the Housing Fund to 1.5 per cent.

The levy was one of the main talking points during public participation hearings on the Finance Bill, 2023, with calls for it to be dropped altogether.

President William Ruto prevailed on the House committee chaired by Molo MP Kimani Kuria to make the changes to the Bill, which is to be tabled in the National Assembly today.

Kuria’s committee has also recommended that the proposed 15 per cent Value Added Tax (VAT) on Digital Content Creation be reduced to five per cent, offering a reprieve for young people who make money from digital content and businesses.

A source within the committee told People Daily that members had also recommended tax waivers on agricultural inputs, vaccines and electric cars.

It has, however, resolved to retain the 16 per cent VAT on petroleum products, which will bring tax on petrol to the same level as kerosene and diesel.

The reworked report is likely to be tabled in the House this afternoon but a source in the Budget committee said this was not guaranteed as more work was still pending.

“If we do not make it this afternoon we might table the report on Wednesday, a day before the Budget report is read,” said the source.

Formal sector

Gatanga Member of Parliament Edward Muriu, a close ally of President Ruto, was the first to hint at a reduction in the Housing Fund deduction after revealing through a tweet that the President had agreed to climb down and lower the contentious levy from three per cent to 1.5 per cent.

Workers in the formal sector were to have this amount deducted from their pay — up to a maximum of Sh2,500 — while their employers were to match a shilling-for-a-shilling. Contributors will be allowed to redeem the combined amount after seven years or they could opt to buy a low-cost house and pay the difference.

Muriu, who also serves as the Secretary for Legal Affairs for the United Democratic Alliance (UDA), said in the tweet that the President had listened to Kenyans.

“Thanks, HE for listening to Kenyans on the tax Bill proposal with levy coming down from 3% to 1.5%. Kenyans are happy,” he tweeted. “The next battlefront is KPLC power bills. They have doubled. Confront the power purchase agreements head-on”.

Dennis Itumbi, the appointee for Chief Administrative Secretary for Communications, Telkom and Digital Economy, also wrote on Twitter: “Feedback counts, President Ruto listens.”

Amendment

Later in the day, Kuria said his committee was considering other amendments as suggested by Kenyans who appeared before the committee during the public participation stage.

The committee had three days to compile its final report, but members felt the time was not adequate due to the huge workload.

“Every Kenyan that spoke to us, we will include their remarks, this will be the largest report ever tabled in Parliament. It will be a thousand pages because we must put the views of all Kenyans,” said Kuria.

“We cannot go with everything contained in the Bill; God will give us wisdom to make the best decision. The views Kenyans gave us will not be taken for granted. In the 157 documents, every clause matters.”

He dismissed claims by a section of leaders from the minority Azimio la Umoja Coalition that the Bill would be passed without amendments, which would hurt Kenyan taxpayers financially.

“Azimio is misguided. The Bill will be passed clause by clause and not as a whole Bill. If they have better ideas they can bring them up for amendment when the Bill is tabled,” Kuria said.

The committee is facing tough times as it seeks to balance between the need to generate revenue for the government in the 2023/2024 Budget, while at the same time bearing in mind the difficult economic times caused by high commodity prices that have pushed up the cost of living.

“This has been the most debated Bill in the history of Kenya. It’s like we are doing a referendum. We bear in mind it is a very aggressive and dynamic Bill. We are seeking to expand the tax base by getting additional revenue without borrowing but we are doing so minding the cost of living,” Kuria told a press conference at the weekend.

Influencers

The Bill has proposed a new definition for the term “winnings” to mean the payout from a betting, gaming, lottery, prize competition, gambling or similar transaction under the Betting, Lotteries and Gaming Act without deducting the amount staked or waged.

With this definition, the proposal seeks to eliminate ambiguity on how to tax payouts on the staked and waged amounts. In the past, there has been debate as to whether the amount one wagers is subject to taxation.

On a related proposal, the growth in social media usage over the years has led to an emergence of a digital economy with a wide array of players and services that the government wants to now include in the tax bracket. Social media influencers, among others, have taken advantage of the opportunity to monetise their work, content and services.

Cognisant of the rise in the use of such media/channels, the government has proposed through the Finance Bill to impose a 15 per cent withholding tax on income earned by resident persons from digital content monetisation.

Digital content monetisation has been defined in the Bill as offering for payment entertainment, social, literal, artistic, educational or any other material electronically through any medium or channel, through the various forms, including social media platforms and advertisement on websites.

The Bill also seeks to impose a five per cent withholding tax on local sales promotion, marketing and advertising services offered by resident persons. In 2020, a 20 per cent withholding tax was introduced on sales promotion, marketing and advertising services rendered by nonresident persons. The move is aimed at improving government cashflow while also expanding the tax base.

The tabling of the Finance Bill before Thursday is expected to pave the way for the Treasury Cabinet Secretary, Njuguna Ndung’u, to present the Budget estimates for approval by legislators.

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