While Kenyans continue to experience difficult living conditions due to the increase in the high cost of living, there is no hope of relief being found soon. This step comes after the government announced an increase in the National Health Insurance Fund {NHIF} and National Social Security Fund {NSSF} fees.

The current rates, where salaried workers pay between Sh150 and Sh1,700 based on their monthly pay, are being scrapped and replaced by a fixed rate of 2.7 percent of their salary. Likewise, through the Finance Bill, every employee will have to pay three percent of his salary to serve the new housing development fund. The government has emphasized that the payment is not a tax but savings even though the deductions will be protected by law and given to employees’ salaries.

Despite the complaints of many workers and employers about the effects of the levy, the government insists that the program is important because it will create job opportunities for millions of unemployed people in the country. However, there has been a lack of accurate information on how people will benefit from these housing projects, especially considering that those with no income will not contribute, while some who are forced to contribute may be paying debts for the construction of their own homes.

Speaking to journalists early on Wednesday, permanent secretary of the Ministry of Housing and Urban Development Charles Hinga said that the fee will be used as a guarantee for investors that the government wants to engage in building houses.

“Some of you are asking why we can’t give the money voluntarily. But when it is run by law, if I get a billion a month, it means I can go out and call investors and tell them that as long as the law is there, I will collect the money after three years,” he said.

Comparing the fee to fuel tax paid by Kenyans, the secretary said the government would not be able to build roads if it is not sure of the flow of money every month to provide road construction companies.

The effect of these fees is expected to become a burden for all workers in the country by July 2023. President William Ruto on Tuesday urged fellow MPs of his Kenya Kwanza coalition to support his tough tax proposals and public debt relief plans. The President’s move to encourage his lawmakers to support his agenda came as senators resumed their sessions after a long break and their counterparts in the National Assembly are expected to return next Tuesday.

On Monday, President Ruto brought in experts, including Chief Secretaries and members of the Cabinet to educate MPs about his tax proposals and agenda. President Ruto is looking to repair the heavily indebted economy he inherited from his predecessor Uhuru Kenyatta, who rushed to borrow to finance expensive infrastructure projects.

Despite promising to improve the lives of poor Kenyans during last year’s election campaign, Ruto is now taking the unpopular step of raising taxes. This means that if you receive a salary of Sh. 100, 000 Kenyans per month you should prepare to be reduced by at least Ksh. 4,380 more according to the discounts.

According to calculations made by the Business Daily newspaper, the salaries of these workers who come from middle class families in Nairobi according to the Kenya National Bureau of Statistics (KNBS) expenditure calculation – will decrease from the current average of Sh76,041 to Sh71, 661.

In addition to affecting the salary level of Kenyans, the plan may also increase the burden on companies and cause many workers to lose their jobs if some of these taxes are approved by parliament.

According to the new changes proposed by President William Ruto, whose aim is to protect the health of workers and their families, it will target all income groups while those with salaries below Sh20,000 will be deducted Sh2,630.

Already, employers have started implementing the new standards of the National Social Security Fund {NSSF}.The revised NSSF rates have resulted in the NSSF fee rising to Sh1,080 from the current Sh200. This means that the employer is also obliged to provide the government with such a rate.

Although all workers will see their wages reduced by these changes, people who are paid the highest wage rate will have to pay an additional 35 percent PAYE (Pay As You Earn) tax on income above Sh500,000.

This will make those earning Sh600,000 a month pay Sh22,904 from their salary, while the government is looking for an increase of Sh350 billion in taxes in the next financial year.

The government of Kenya Kwanza says that the increase in savings through the NSSF will help not only to provide benefits to workers in their retirement but also to enable the government to access local funds if it wants to borrow.

In the next Fiscal Budget starting in July, Kenya’s tax collection authority KRA aims to collect Sh2.89 trillion, which is an increase from the current level of Sh2.53 trillion.

The government expects income tax collections—which include PAYE and business income tax paid by businesses—to increase by Sh194.2 billion to Sh1.2 trillion in the financial year ending June next year.

Until now, the difficult business environment has made the government unable to collect PAYE taxes during the six months of this financial year.

The latest changes in the Finance Bill, 2023, if approved by parliamentarians, are likely to increase the inflationary pressure felt by Kenyans as the high cost of living reduces their purchasing power.

Opposition leader Raila Odinga has already threatened to call for protests for what he called a “tax tsunami”.

Earlier this year, the leader led a series of antigovernmental protests over the high cost of living, among other allegations of vote rigging in last year’s election

by Emodia Hallan