Kenyan President William Ruto has signed into law a controversial bill that paves the way for the government to continue collecting housing tax of 1.5% of workers’ monthly salaries.
This levy is intended to fund the construction of affordable housing for poor Kenyans.
However, this provoked an outcry from the opposition and from large sections of the population who felt burdened by the flood of new taxes.
This law was challenged in court.
The judge suspended the deduction due to a lack of legal framework.
However, MPs approved the bill with amendments last week despite objections from opposition members.
The levy was mentioned in Mr Ruto’s manifesto for the 2022 elections and was part of the Finance Bill passed in June last year, which also doubled the fuel excise tax.
New, higher health insurance premiums are coming into effect soon.
The government argues that it needs to reduce the budget deficit and raise tax revenue to pay for public services.
Since July last year, authorities have started deducting 1.5% housing tax from people’s wages.
But amid public outrage, an activist took the government to court and won, claiming the government had unfairly excluded Kenyans in the public sector who earn a regular monthly salary.
To address the issues raised by the court, the new law extended the levy to other workers and required unpaid Kenyans working in the informal sector to pay the levy as well.
It is not clear how the government will collect funds from people in the informal sector.
The new law also establishes an affordable housing fund to manage the funds the government receives from the levy.
Officials say the deduction will not be retroactive to the amount that would have been paid had the system not been shut down.
President Ruto aims to build 200,000 affordable housing units a year and wants to create more than 600,000 jobs.
Opposition parties say the government is ignoring Kenyans’ concerns about increased tax burdens and are threatening to take the new law to court.