Tax workers on basic, not gross salary; COTU
Tax workers on basic, not gross salary; COTU
COTU Secretary General Francis Atwoli has appealed to President William Ruto to amend regulations to ensure that certain taxes, such as the housing levy, are calculated based on basic salary rather than gross salary.
Currently, the Affordable Housing Levy is imposed on employees at the rate of 1.5% of their gross salary, with employers matching the contribution by adding another 1.5% of each employee’s monthly gross pay.
Speaking during the Labour Day celebrations on May 1 at Uhuru Gardens, Atwoli argued that taxation based on gross salary is impoverishing workers.
He noted that while workers support the housing levy in principle, their hard-earned income is being drained because some levies are tied to gross pay, which includes various allowances.
“All taxes should be based on basic salary, not gross pay, so that workers can benefit from their overtime payments,” Atwoli said.
“Workers should be able to fully realise the rewards of their overtime.”
Under the current taxation regime, Kenyans’ additional earnings — including allowances and overtime — are taxed, reducing their take-home pay even further.
At the same time, Atwoli urged the president to ensure that employed Kenyans can access affordable housing through loans tied to their payslips.
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“Kenyan workers do not have deposits; let them access affordable houses using their payslips,” Atwoli said.
He emphasised that the law should be streamlined to make it easier for workers to access loans for affordable homes.
In 2024, the Kenya Revenue Authority clarified that gross monthly salary includes basic salary and regular cash allowances such as housing, travel or commuter, and car allowances, as well as any other regular cash payments.
It excludes non-cash payments and irregular income such as leave allowance, bonuses, gratuity, pensions, severance pay, or other terminal dues and benefits.
All employees, regardless of their contract type, are required to pay the Affordable Housing Levy. However, employees paying the levy under Section 31B of the Employment Act, 2007, are not eligible for Affordable Housing Relief under Section 30A of the Income Tax Act, Cap 470.
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