The National Treasury is seeking to amend the Employment Act 2007 to propose a 35 per cent income tax deduction on the salaries of all those earning more than Sh500,000 in Kenya.

In proposals contained in the Finance Bill 2023, National Treasury CS Njuguna Ndung’u seeks to make the deductions through the Pay As You Earn (PAYE) income tax, where deductions for that bracket of earners used to be 30 per cent.

Similarly, Treasury also proposes to deduct 3 per cent of the basic salaries of all employees and matched by 3 per cent by employers to be channelled to the National Housing Development Fund.

The National Treasury has capped the National Housing Development Fund for employees at Sh5,000 in the proposals to be considered by the National Assembly ahead of the budget reading in June.

Treasury, in the bill, also proposes that the accrued contributions of an employee who qualifies for the government’s ambitious Affordable Housing Programme be used to finance them to buy a house.

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For those unable to purchase a house under the affordable housing arrangements after their pay being deducted for seven years or on retirement:

1. First, they be permitted to transfer their accrued contributions to their retirement scheme.

2. They be allowed to transfer the funds to a person eligible for affordable housing programme.

3. They be permitted to move the accrued cash to their spouse or children or a dependent.

4. They be permitted to withdraw their cash, with amount included in their taxable income.

The Treasury proposals are part of President William Ruto’s efforts to raise more cash through fresh taxes as his administrations faces a cash crunch due to an ailing economy and huge loan payments.