With President William Ruto keen on establishing the Housing Fund as his legacy project, MPs put into consideration various stakeholders' views ahead of the reading of the 2023/24 budget on Thursday, June 15.
Ruto has come under sharp criticism for crafting proposals that do not augur well with many Kenyans.
A Legal Framework
In light of the uproar sparked, the National Assembly Finance Committee, on Friday, June 9, proposed enacting a legal framework detailing how the government would collect the 3 per cent salary deductions before implementing the Housing Fund.
A clear guideline on how Ruto's administration would utilise the funds will also be outlined prior to MPs voting on the Finance Bill 2023, which will dictate how the budget will be financed.
Withdrawal of Employer's Contribution
On the other hand, Housing Principal Secretary Charles Hinga intimated that the Ruto government had proposed two changes to the fund, including non-withdrawal of employer contributions and taxation of withdrawals.
In response to queries raised by Kenyans on social media, the PS indicated that the contributors could withdraw their salary deductions and those of their employers together after seven years.
"The employer portion can be withdrawn together with that of the employee at the earlier stage of seven years or retirement," Hinga, who has so far been the face of the project, stated.
Taxation of Withdrawals
"Withdrawal in seven years will now not be taxed. It’s a very participatory process," Hinga explained, hoping the changes would calm the storm.
Earlier, it had been proposed that the employer's contribution remain in the fund for 14 years.
Contributors were also to be taxed when making withdrawals, with the government explaining that the levy was informed by the fact that the contribution would not be taxed at the salary deduction stage.
However, the government had indicated that those transferring their contributions to the retirement scheme would avoid taxation.
"The money is a saving and not a tax as initially proposed. If you could have earned the money, you would have paid tax. That means you did not pay the tax for the seven years," the PS stated then.
Notably, the proposals are set to be discussed by the committee, which will retreat over the weekend to discuss contentious clauses in the Finance Bill 2023, including proposals made by various worker unions and employers during its hearings.
Some of the other notable proposals being considered include the reduction of deduction from 3 per cent to 2 per cent.
If MPs pass the Finance Bill 2023, the Housing Fund will take effect from July 1.
