Senate Majority Leader Aaron Cheruiyot says that Parliament is yet to approve the regulations for the management of the Housing levy, which is already being deducted from workers’ salaries.
The levy which took effect on July 1, is part of the Finance Act 2023, which was signed into law by President William Ruto in June.
The Act introduces various changes to the tax and social contributions, including the Housing Levy, new PAYE tax and an increase in VAT on petroleum products.
Speaking on Spice FM on Wednesday, September 13, Senator Cheruiyot said that the funds collected so far have not been spent and that the levy is meant to build a fund that will run the housing program.
“The regulations for the Housing levy are in the process of being concluded, and they have been a subject of debate in previous parliamentary group meetings,” he said on Wednesday.
He added that one of the amendments made was on the cost per unit of the houses, which will determine how the program will be rolled out.
The Majority Leader also clarified that the houses being launched by President Ruto under the Boma Yangu initiative are not related to the Housing levy.
“These housing projects are funded by existing regulations or by government institutions. The mandatory deduction of the Housing levy began two months ago, and nothing has been expensed from it,” he said.
Ruto has lately commissioned the construction of affordable housing units in different parts of the country, including in Nakuru and Kakamega, where he launched 220 units.
The National Assembly Committee on Finance and National Planning rejected the pleas and lobbies by Kenyans that noted the levy would play a part in making life unbearable by reducing the money that employees take home.
The committee chaired by Molo MP Kuria Kimani retained the levy, albeit at a lower rate of 1.5 per cent of an employee’s basic pay. This is from the earlier proposal of three per cent.
The MPs also dropped the requirement to have employers match the contributions of their employees.
The money is to be used for the construction of affordable houses.
“The proposal was amended to make it a levy as opposed to a mandatory contribution. Further, the rate was reduced from three per cent to 1.5 per cent,” said the committee in its report on the Finance Bill 2023 tabled in Parliament.
By making it a levy as opposed to a contribution, the money will not be refundable to employees as in the earlier proposal.
The National Treasury had initially proposed a three per cent contribution that would be matched by employers also at three per cent.
The contributions were capped at a total of Sh5, 000 for both employee and employer.