Kenya’s President William Ruto has signed into law a controversial bill, paving the way for the government to continue collecting a housing levy of 1.5% of a worker’s monthly pay.
The levy aims to fund the construction of affordable housing for low-income citizens, though its implementation has sparked widespread criticism.
Opposition voices and a significant portion of the public have expressed dismay over the levy, viewing it as an additional burden amidst a slew of new taxes.
Legal hurdles previously delayed the bill’s enactment, with a judge halting deductions due to a lack of a proper legal framework. Despite objections from opposition lawmakers, the bill was amended and ratified by Members of Parliament last week.
Originally outlined in President Ruto’s 2022 election manifesto, the levy forms part of a broader finance law passed last June, which also saw a doubling of the sales tax on fuel. Additionally, a heightened health insurance levy is set to be introduced soon.
The government contends that bolstering tax revenues is essential to narrowing the budget deficit and funding essential public services.
The authorities had begun deducting the 1.5% housing levy from salaries since last July. However, amid public anger, one activist took the government to court arguing successfully that it unfairly singled out Kenyans in the formal sector who get a regular monthly salary.
In order to address the issues raised by the court, the new law now extends the levy to other workers and now requires non-salaried Kenyans in the informal sector to pay the levy.
The new law also establishes the Affordable Housing Fund, which is intended to manage the money the government will get from the levy.
The authorities say the deduction will not be backdated to include the money that would have been paid had the scheme not been suspended.
President Ruto is aiming to construct 200,000 affordable housing units every year and hopes to create more than 600,000 jobs.