President Uhuru Kenyatta wants MPs to rescind their vote against the 0.5 per cent tax on gross pay per month as long as the contribution does not exceed Sh5,000. Employers were to match the contribution.
Workers had been spared a pay cut of up to Sh5,000 after MPs argued that the levy would cause a significant cost burden to companies and hurt employees.
The President has also petitioned the lawmakers to reinstate the rejected Robin Hood tax of 0.05 per cent on bank transfers of over Sh500,000, which a court has temporarily suspended following opposition from bankers.
President Uhuru Kenyatta has asked Parliament to reinstate the 0.5 per cent tax on workers’ salaries for funding low cost homes and the Robin Hood levy on bank transfers of over Sh500,000.
Mr Kenyatta wants MPs to rescind their vote against the 0.5 per cent tax on gross pay per month as long as the contribution does not exceed Sh5,000. Employers were to match the contribution. The President has also petitioned the lawmakers to reinstate the rejected Robin Hood tax of 0.05 per cent on bank transfers of over Sh500,000, which a court has temporarily suspended following opposition from bankers.
Mr Kenyatta explained why he rejected the Finance Bill which sought to postpone the 16 per cent VAT on petrol, among other issues. A House leader familiar with the content of the President’s memorandum to Parliament said yesterday that MPs were unlikely to reject the bank transfer and homes fund levies. Parliament will reconvene today to examine Mr Kenyatta’s new proposal and 233 MPs’ votes can defeat the President’s suggestions.
The rejected taxes were designed to fund a range of government project including universal healthcare, affordable housing and cut Kenya’s widening budget deficit.
Kenya targeted a budget deficit of 5.7 per cent of GDP for the new financial year, less than the 7.2 per cent budgeted for in the 2017/18 year.
Tax revenues were projected to rise by 17.5 per cent to 1.9 trillion, equivalent to 20 percent of GDP.
The government has been criticised in recent years for ramping up borrowing for infrastructure projects including the Nairobi-Mombasa railway. “With most tax measures not approved, the fiscal deficit is likely to remain higher than projected,” Jibran Qureishi, an economist at Stanbic Bank, told Reuters in an earlier interview.
Workers had been spared a pay cut of up to Sh5,000 after MPs argued that the levy would cause a significant cost burden to companies and hurt employees.
According to the tax an employee earning Sh100,000 would contribute Sh500 every month to the fund. The creation of the fund was meant to help the government build half a million affordable housing units in five years. However, the tax faced hostility from unions and employers who considered it burden.
Banks strongly opposed the tax saying it would stifle the flow of funds and curb investments.
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