Parliament has adopted recommendations that exempt retirees aged 65 and above and the National Social Security Fund (NSSF) from paying taxes.
On Tuesday, members of Parliament voted through acclamation backing the proposal by the National Assembly’s Finance and National Planning committee seeking to protect pensioners’ earnings.
Treasury has proposed a tax of up to 25 percent on the monthly pay of pensioners and another tax on NSSF's annual earnings, effective July 1.
“The proposal is not good because it will reduce pensioners’ benefits paid by NSSF. We are saving pensioners. We know that it is in the public domain that they have been decrying the proposal to tax them,” said the committee’s chair Joseph Limo.
MPs said the new tax on retirement savings would amount to double taxation since pensioners already paid taxes on their monthly incomes during their working days.
“How do we continue milking the old cow? They paid taxes during their working days and this is the time they are vulnerable. If we tax people aged 65 years and above it is wrong,” Tinderet MP Julius Melly said.
More than 80 percent of senior citizens work for basic consumer needs, raising questions about the adequacy of pension payouts and coverage of retirement benefits.
In next year’s Budget, the Treasury had sought to remove a range of tax exemptions, including on pension, in the race to make up for revenue lost due to the impact of the economic slowdown caused by the global coronavirus pandemic.
As well as a drop in tax collection caused by Covid-19, Kenya also cut corporate and personal income tax rates in April to boost demand and help firms keep workers on their payrolls.
- Additional reporting by Charles Mwaniki.