The Central Organisation of Trade Unions (Cotu) has welcomed the recent announcement by the Kenya Revenue Authority (KRA) regarding tax reliefs for salaried Kenyans. The reliefs, which are set to be effective from December 27, 2024, represent a significant policy shift aimed at alleviating the financial burden on employed Kenyans. Cotu Secretary General Francis Atwoli hailed the move as a demonstration of President William Ruto’s commitment to addressing the concerns of Kenyan workers, emphasizing the importance of social dialogue in the decision-making process.
Atwoli noted that the announcement marks a crucial step in recognizing and responding to the plight of Kenyan workers who have been grappling with the challenges of high taxation. He pointed out that the double taxation regime, where deductions for the Housing Levy and Social Health Insurance Fund were subjected to Pay As You Earn (PAYE), was eroding workers’ disposable income and reducing their take-home pay. The Union’s engagement with President Ruto and the subsequent action reflects a constructive approach to problem-solving that prioritizes workers’ welfare.
The KRA’s recent statement clarified that the Tax Laws Amendment Act, 2024, would come into force at the end of December, implementing several key changes. The announcement marked a significant intervention, affecting how the PAYE is computed for December 2024 and subsequent periods. Under the new provisions, deductions for the Affordable Housing Levy and contributions to the Social Health Insurance Fund (SHIF) will no longer be taxed twice. This means that employees will take home slightly more pay, thereby providing them with greater financial relief.
The tax relief measures outlined by KRA are aimed at addressing the grievances raised by Cotu regarding the double taxation of these deductions. The statement specified that this adjustment will include contributions made to the SHIF, as well as mortgage interest not exceeding Sh360,000 annually for loans obtained from one of the first six financial institutions specified in the Fourth Schedule to the Income Tax Act. Furthermore, the policy change also accommodates contributions to registered pension or provident funds, capped at Sh30,000 monthly, and contributions to post-retirement medical funds, capped at Sh15,000 monthly.
This policy adjustment is seen as a crucial step towards revitalizing industrial relations in Kenya. Atwoli emphasized the importance of social dialogue in achieving these results, noting that constructive engagements between workers, employers, and the government were key to understanding and addressing the issues faced by Kenyan workers. The commitment to social dialogue, Atwoli said, ensures that all stakeholders can collaboratively work towards sustainable solutions that benefit the broader society.
The Cotu Secretary General also urged the government to continue embracing social dialogue as a critical tool for improving industrial relations. He stressed that this approach not only provides a platform for open communication but also fosters an environment where workers’ rights and interests can be protected and promoted effectively. This approach contrasts sharply with a top-down imposition of policies and reflects a commitment to democratic processes and transparency in governance.
KRA’s announcement follows a suspension of tax reliefs in February 2023, when the authority found that certain individuals, companies, and multinationals owed the state over Sh1 trillion due to ‘unprocedural’ exemptions and refunds. This move created a temporary gap in the tax reliefs system, leading to concerns about the impact on workers’ finances. However, with the reintroduction of these tax reliefs, the government aims to restore confidence in the tax system and ensure that Kenyan workers are not unfairly burdened by excessive deductions.
In conclusion, the tax reliefs announced by KRA and welcomed by Cotu represent a step towards creating a fairer tax regime for salaried Kenyans. The emphasis on social dialogue and constructive engagement between the government and workers’ representatives is vital in making informed decisions that reflect the needs and aspirations of the people. As the measures take effect in late December, it will be important to monitor their impact on the financial well-being of Kenyan workers and to ensure that these changes translate into tangible benefits for all salaried employees in the country.
