Building Costs to Rise After Re-Introduction of Construction Taxes

  • Workers pictured at a construction site.
    Workers pictured at a construction site.
  • Building costs are set to rise after a Cabinet committee approved the re-introduction of construction levies that were scrapped in 2017. 

    The National Development Implementation and Communication Cabinet Committee (NDICCC) argued that the ban on the levies had hindered investment; an ironic explanation to their 2017 clarification when they removed the taxes. 

    Back then, the Cabinet had stated that scrapping the levies would reduce the burden on investors and expedite construction activities. 

    "Multiple charges levied by various ministries, departments, agencies and county governments on the construction industry have contributed to the increase of costs in the sector and led to inordinate delays in obtaining requisite approvals,” State House announced in a press release. 

    EPS panels houses under construction in Kenya.
    EPS panels houses under construction in Kenya.

    If reinstated, the contractors will pay between Ksh10,000 and Ksh40 million audit fees to the Ministry of Environment under CS Keriako Tobiko, depending on the type and size of houses under construction. 

    This was dubbed as the Environmental Impact Assessment (EIA) licence fee. 

    Developers would also pay 0.5 percent of the value of the contract for projects that cost over Ksh5 million. 

    "Though this memorandum was approved by the National Development Implementation and Communication Cabinet Committee, it may not be implemented or communicated until ratified by Cabinet.

    "The same will be given high priority when the next Cabinet meeting is convened," Joseph Kinyua, Head of Public Service wrote to CS Tobiko.

    Apart from the EIA licence fee, contractors will continue paying 2 percent royalty on construction materials and the county approval fee paid to county governments. 

    The new proposal to reintroduce construction levies comes at a time when the government is grappling with raising funds for the financial year 2021/2022

    Treasury introduced taxes on airtime and bank fees. However, MPs rejected plans to tax bread, flour, purchase of motorcycles and fishing equipment. 

    A Cabinet meeting held by President Uhuru Kenyatta at State House, Nairobi on Thursday, October 8, 2020