Housing levy: Employers stare at stiff penalties if they delay to remit tax

Azimio MPs walk out of Parliament Chambers in protest against the Finance Bill 2023 as Treasury CS Njuguna Ndungu presented the 2023/24 Budget highlights on June 15, 2023. [Elvis Ogina, Standard]

Voting on the controversial Finance Bill, 2023 went late into the night leaving employers staring at stiff penalties should they delay to remit the housing levy within nine days.

Content creators were handed a shocker when an attempt by Azimio to scrap the proposed 15 per cent withholding tax was defeated during the dramatic manual voting amidst allegations that the electronic voting system had been sabotaged.

Seme MP James Nyikal had moved the amendment seeking to have part (b) of the clause which seeks to have content creators surrender five per cent of their earnings as withholding tax deleted.

The House, however, went into a division forcing Deputy Speaker Gladys Sholei to call for an electronic vote.

But the Azimio brigade quickly claimed that they did not have their electronic cards and that the electronic voting system was faulty, all the while advocating for the more time-consuming manual voting system.

"We shall engage in electronic voting as guided by Speaker Wetang'ula ... it is, however, apparent that the electronic systems are not working and we will proceed with manual voting," said Shollei.

But Kiharu MP Ndindi Nyoro, the chairman of the Budget and Appropriation Committee was not amused. "Is it a coincidence that every time we have a vote the electronic system fails? We have invested colossal amounts in the IT department. We must have a meeting with IT and determine whether they require support," he said.

Ultimately, a total 189 members voted for the clause, 87 against while three abstained.

In amendments proposed by the Finance and National Planning Committee, employers are required to remit 1.5 per cent housing levy deducted from employees to the government in nine days to fund affordable housing scheme.

According to amendments introduced to the Bill, employers will also be required to remit their top-up within the same period, should the Finance Bill be enacted into law.

The provision is part of a raft of new amendments introduced by the Molo MP Kimani Kuria-led committee and which were the subject of heated debate yesterday.

Under the amendments by Mr Kimani, the amount payable towards the housing levy is 1.5 per cent of the employees' monthly gross salary with their employer matching a similar amount. The amount has been reviewed downwards from an earlier proposed 3 per cent.

"An employer shall not later than nine working days after the end of the month in which the payments are due, remit an amount comprising the employee and the employer's payment," reads the Bill in part.

An employer who fails to comply with this section shall be liable to payment of a penalty equivalent to two per cent of the unpaid funds for every month the same remain unpaid.

Notably, an earlier proposal had capped the housing levy at 2,500 but it has been removed in the new amendments.

Kabuchai MP Maijmbo Kalasinga had proposed that the housing levy be retained at 1.5 per cent of employees' basic pay but be made voluntary. Under this proposal, an employee may opt to increase their contribution to the fund by writing to the employer and the Cabinet secretary responsible for housing, specifying the higher monthly contributions.

Where an employee opts to make a higher contribution, however, the employer shall not be required to make a corresponding contribution.

Mr Kalasinga also proposed that voluntary contributors to the levy should enjoy benefits such as the funds being used to finance the purchase of a home under the affordable scheme.

He further said that upon the expiry of seven years, or after attainment of retirement age, the funds can be transferred to a spouse or dependent children, or that the contributions can be transferred to a retirement benefits scheme or pension scheme registered with the Retirement Benefits Authority.

Contributors will also have the option of receiving their contributions in cash at the prevailing interest rate.

National Assembly Deputy Minority leader Robert Mbui, Homa Bay Town MP Peter Kaluma, Mathare MP Anthony Aluoch and Kitui Central MP Makali Mulu called for the scrapping of the housing levy.

The Finance Committee also introduced an amendment to Clause 24 of the Finance Bill dealing with individual rate of tax.

The House team proposed that for the first Sh288,000 in income, a 10 per cent rate of tax will apply, 25 per cent on the next Sh100,000, 30 per cent on the next 5.6 million, 32.5 per cent on the next Sh3.6 million and a 35 percent rate of tax on all income over Sh9 million.

Earlier, the committee had proposed an income tax of 32 per cent for those raking in between Sh500,000 and Sh800,000, while those above Sh800,000 had been subjected to 35 per cent income tax.

In their submitted proposals, the Azimio MPs opposed the income tax rates with Saboti MP Caleb Hamisi proposing that the same be adjusted to 10 per cent on the first Sh288,000 and 22 per cent on income above Sh288,000.

Mr Kaluma suggested a 5 per cent tax on the first Sh288,000, 25 per cent on the next Sh100,000, 30 per cent on the next Sh5.6 million and 35 per cent on all income over Sh12 million.

Other amendments that made it to the floor of the House include proposals by both the committee and Azimio to scrap a 5 per cent levy that had been imposed on wigs, false beards, eyebrows and eyelashes.

A similar tax on artificial nails was also scrapped. By the time of going to press, debate on the Bill was underway with the MPs voting clause by clause.