Employed Kenyans could soon be forced to pay a two percent tax from their incomes to cushion the jobless as per the new government plans in the next two years.
The proposal is part of the National Treasury post Covid-19 economic recovery plan which is expected to set the stage for increased taxation for employed Kenyan who already account for a number of other statutory deductions including the NHIF and other indirect taxes.
Proceeds from the tax to be partly contributed by employers at the rate of one percent to be deposited to the unemployment insurance fund (UIF).
“The government will establish a UIF to cushion workers in financial distress by providing them with short-term relief when they become unemployed or are on unpaid leave or unable to work because of illness,” the National Treasury said.
“The amount of contribution to the fund will be two percent which includes one percent paid by employees from remuneration paid and one percent paid by the employers.”
The Planning Ministry together with its development partners is expected to sink in a total of Ksh.300 million to the fund across the next two fiscal years to June 2022.
The first tranche of Ksh.100 million will be sunk in the financial year ending June 2021.
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According to the Kenya National Bureau of Statistics (KNBS), only 15.9 million Kenyans found in both the formal and informal sectors would be eligible for the tax with the rest of other Kenyans being unemployed or outside the labour force.
The UIF is thought to be part of the solution to Kenya’s endemic unemployment which has been worsened by the Cvoid-19 pandemic.