KRA steps up housing levy collection amid legal battles
Kenya Revenue Authority (KRA) has stepped up collection of the controversial affordable housing levy as the government seeks to increase its revenue from taxation in the middle of a tough economy.
The levy, which came into effect from March 19, 2024 is intended to pay for the construction of affordable housing for poorer Kenyans. However, it has sparked an outcry from a large section of the population who feel burdened by a raft of new taxes.
In its latest communication, the taxman says the Affordable Housing Act 2024 introduced Affordable Housing Levy (AHL) for all persons, adding: “This is therefore, to remind you to remit the AHL by the due date of 9th of every month, starting this month of May 2024.” KRA said in a statement signed by Loyford Kubai, Head of Domestic Tax Department operations for North Rift Region.
It explained that AHL will be charged at a rate of 1.5 per cent on the gross income received or accrued. This includes gross rental income, gross sales receipts subject to turnover tax, and sales before the application of Value Added Tax (VAT).
Avoiding penalties
The KRA has set the due date for remittance of the AHL as the 9th working day after the end of the month in which the gross salary was due or gross income was received or accrued. According to Authority this arrangement ensures that taxpayers make their contributions in a timely manner, thereby avoiding penalties.
In the event of non-compliance, a penalty of three per cent will apply for each month that the levy remains unpaid, it said. The AHL’s implementation has not been without challenges. Legal hurdles emerged when the Court of Appeal declined to issue stay orders suspending the implementation of a High Court decision that declared the provisions of the Employment Act, 2007 on the affordable housing levy unconstitutional.
In the latest legal challenge, parties opposed to the new housing levy on Friday won the first round against the government after the high court dismissed the Attorney General’s application to have 10 cases struck out. High Court Judge Chacha Mwita ruled that the cases filed by among others 22 Senators had legitimate constitutional issues that needed to be heard and settled.
The Attorney General had argued that the Constitutional Division of the High Court had no powers to hear the cases as they revolved land use, housing and levies. He argued that the right forum ought to be the Environment and Lands Court (ELC). However, Justice Chacha Mwita said that there was a contest on the process of coming up with the new housing levy.
He sent the files to Chief Justice Martha Koome to impanel a new bench to hear and determine the cases. At the same time, Trade Union Congress of Kenya (TUC-KE) has a separate case against the AG, National Assembly, Treasury and the taxman.
Despite these challenges, the KRA continues to collect the housing levy. It directed employers to deduct 1.5 per cent from employees’ gross salaries and remit it together with a matching contribution of 1.5 per cent for each employee with effect from March 19, 2024. Meanwhile KRA and Kenya National Chamber of Commerce and Industry (KNCCI) have joined forces to boost tax compliance among micro, small, and medium-sized enterprises (MSMEs).
Education programmes
This collaboration will see the roll-out of joint tax education programmes and the establishment of tax clinics across the country. Humphrey Wattanga, KRA Commissioner General highlighted the importance of the partnership in addressing tax complexities and expanding the tax base, particularly within the MSME sub-sector.
In addition to enhancing tax compliance, the partnership will combat illicit trade and promote a conducive business environment. KNCCI President, Erick Rutto, affirmed the institution’s commitment to leveraging technology to streamline tax processes and enhance compliance, particularly through the use of the Electronic Tax Invoice Management System (eTIMS).
