President William Ruto has defended the Affordable Housing Levy, claiming teachers earning KSh50,000 monthly could take home an additional KSh1,250 under his proposed PAYE tax reductions.
Speaking during the official opening of the Kenya Comprehensive School Heads Association (KECSHA) meeting in Mombasa on Thursday, November 12, Ruto explained how the planned changes to income tax would offset deductions made under the housing levy.
The president said the government intends to increase the monthly PAYE tax exemption threshold from KSh24,000 to KSh32,000, allowing employees to retain more of their salaries.
Ruto Proposes Raising PAYE Tax-Free Threshold to KSh32,000
Under the proposed tax changes, employees would not pay PAYE on the first KSh32,000 of their monthly taxable income, up from the current KSh24,000 threshold.
Ruto said the additional KSh8,000 in tax-exempt income would translate into KSh2,000 in monthly tax savings for workers falling within the 25 per cent tax bracket.
He defended the proposal against criticism from his political opponents, who have raised concerns about deductions from workers’ payslips.
“My competitors are sponsoring a debate saying they want to protect the payslip. We are proposing that we want to remove PAYE on the first KSh32,000 on what you earn,” he said.
How Teachers Earning KSh50,000 Could Benefit
Using a teacher earning KSh50,000 as an example, the president explained how the proposed PAYE reduction would compare with the Affordable Housing Levy deduction.
According to his calculation, the teacher would contribute KSh750 towards the Housing Levy, equivalent to 1.5 per cent of the monthly gross salary.
However, the proposed PAYE adjustment would save the employee KSh2,000 in monthly taxes.
“So we are saying, you are not going to pay KSh2000 from your salary, so the KSh750 that you pay, I have returned to you KSh2000. So the difference is KSh1250,” Ruto stated.
The president argued that the resulting KSh1,250 difference would leave the employee with additional money despite the continued housing levy deduction.
Government Plans Wider Changes to PAYE Tax
The proposed adjustments form part of a broader tax relief plan that seeks to increase the monthly tax-free income threshold to KSh32,333 while abolishing the existing KSh2,400 personal relief.
Under the proposed arrangement, employees would continue paying the 1.5 per cent Affordable Housing Levy from their gross salaries.
The government therefore intends to provide relief through changes to PAYE rather than abolishing the housing levy.
Ruto Defends Affordable Housing Programme
Ruto also defended the Affordable Housing Programme, arguing that it had created employment opportunities and supported the construction of residential houses, markets and student accommodation.
He claimed approximately 1.1 million people were working under the initiative.
The president further disclosed that contracts covering houses, markets and student hostels had reached KSh1.2 trillion.
He added that student accommodation facilities with a combined capacity of more than 180,000 learners were under construction in different parts of the country.
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