Editor's Review

He revealed that there were ongoing discussions on the restructuring of the Housing Levy

Treasury Cabinet Secretary John Mbadi has revealed that the government had considered reducing the individual income tax, also known as Pay As You Earn (PAYE), in the upcoming financial year.

However, the government was forced to drop the plan as KRA could not meet its targets.

Speaking in the Senate on Wednesday, June 4, Mbadi noted that the move would have significantly reduced the tax burden on employed Kenyans.

Nonetheless, he expressed that the plan would be considered in the upcoming financial year.

"When we were preparing the Finance Bill, we also did some simulation on how to reduce PAYE, but what stopped us from implementing it with this Finance Bill alongside the Corporate Tax was the failure by KRA to meet its revenue targets," he explained.

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"We thought that as we carry out reforms at KRA, we should not be doing many things at the same time. First, let us see what the reforms at KRA are doing for us in terms of automation, then we can move to the next step."

File image of the Mukuru affordable houses.

Equally, he detailed that there were ongoing discussions on the restructuring of the Housing Levy that sees Kenyans taxed 1.5 per cent of their salaries.

In the restructuring, the government will consider reducing the rate as has been proposed by stakeholders, including the Federation of Kenya Employers (FKE).

"On the Housing Levy, there are already discussions on how to restructure it because, in my view, it has serious benefits as many projects are coming up, but at the same time, the individual employees have complaints that you cannot ignore.

"A lot of restructuring is going on and I am sure that more pronouncements will come in due course," he stated.

According to FKE, the Housing Levy needed to be reduced to offer reprieve to employees who are already burdened with other taxes.

Consequently, the group has been pushing for the reduction of the 1.5 per cent rate to 0.5 per cent.

“These steps, if adopted, would ease the cost of living, increase the disposable income of the lowest-paid employees, and make Kenyan businesses more competitive,” FKE CEO Jacqueline Mugo.