Kenyans who are employed could soon be forced to pay a new 2 percent tax from their salaries to cushion the jobless majority as part of a new government plan in the next two years.
In the proposal contained in the National Treasury post COVID-19 economic recovery strategy will set the stage for increased taxation for employed individuals who already account for a number of other statutory deductions such as NHIF and further indirect taxes.
Proceeds from the tax to be partly contributed by employers at the rate of 1 percent are expected to go into the soon to be set up 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 with be two per cent which include one per cent paid by employees from remuneration paid and one per cent paid by the employers.”
According to the proposal, the Planning Ministry along its development partners is expected to collect a total of Sh300 million into the fund across the next two fiscal years to June 2022.
About 15.9 million employed individuals in both the formal and informal sectors will be eligible for the tax with other Kenyans being unemployed or outside the labour force.
GOK says UIF the solution to Kenya’s endemic unemployment which has been worsened by the COVID-19 pandemic.
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