Workers, traders and employers risk bank account freezes, asset seizures and PIN deactivation as the Kenya Revenue Authority (KRA) prepares to launch a crackdown on Housing Levy defaulters.
The clampdown follows changes to the law that took effect on July 1, allowing KRA to enforce collection of unpaid levies through tough measures deployed on tax cheats and defaulters.
KRA has been collecting the levy equivalent to 1.5 per cent of gross pay or income from July 2024, but lacked the legal powers to crackdown on defaulters, allowing thousands of workers and firms to evade payment.
The Finance Act plugged the loophole and offered KRA higher commissions for the taxman on collection of housing levies, whose collection in the year to June stood at Sh79.9 billion.
Housing Principal Secretary Charles Hinga said the government now expects “greater bite” from KRA after the Authority insisted on explicit legal powers before pursuing employers who deducted the levy from workers but failed to remit it.
Housing Principal Secretary Charles Hinga.
Photo credit: File | Nation Media Group
“KRA said they needed explicit powers to recover unremitted or unpaid amounts,” Mr Hinga said on Friday, signalling that the ministry now expects stronger enforcement.
An audit of the Affordable Housing Fund, which manages the billions of shillings the government gets from the levy, revealed that thousands of taxpayers are paying tax and not the housing levy.
Default rates are higher in the informal sector where traders are not paying the levy, and businesses such as corner shops, salons and bars are not remitting deductions from their staff pay.
The Auditor General’s checks revealed that 6,390 companies remit Pay-As-You-Earn (PAYE) tax, which KRA has powers to enforce compliance, and not the Housing Levy.
Mr Hinga said KRA would begin internal reconciliations to identify unpaid levy and enforce recovery.
“They are now able to assess, evaluate and prosecute taxpayers who have not remitted. Internally, they [KRA] are going to do reconciliations and do what they need to do,” he said.
The levy, which was introduced in 2024, is intended to pay for the construction of affordable housing.
But it sparked an outcry from the opposition and a large section of the population who feel burdened by a raft of new taxes.
An affordable housing project.
Photo credit: File | Nation Media Group
An earlier law had left out informal sector workers from paying the levy, triggering discrimination concerns.
The High Court suspended collections for three months after ruling that the levy was unconstitutional for targeting formal employment.
Parliament responded by passing the Affordable Housing Act, 2024, which broadened the framework to include workers in the informal, or jua kali sector, allowing collections to resume from March 2024.
The Finance Act 2026 introduced Section 39B of the Tax Procedures Act, empowering the KRA Commissioner-General to recover unpaid fees, levies and charges collected under law as though they were unpaid tax liabilities.
The change has expanded KRA’s enforcement mandate beyond ordinary taxes and allows it to deploy the same recovery procedures used against tax defaulters.
It will hinge on section 42 of the Tax Procedures Act, which empowers the KRA to deactivate PINs, issue travel bans, collect cash due from the taxpayer’s banker and suppliers and freeze assets.
The KRA can order third parties—such as banks holding a defaulter’s money—to surrender funds directly to cover unpaid obligations.
The taxman can order third parties—such as banks holding a defaulter’s money—to surrender funds directly to cover unpaid obligations under the so-called garnishee orders.
Non-compliant firms and workers risk the suspension or deactivation of their KRA PIN, blocking business operations.
The taxman can place restrictions or secure claims on properties and land to recover outstanding public debt.
Amounts of Sh100,000 or less may be recovered through summary procedures.
Until the amendments took effect, KRA reckoned that enforcement of unpaid housing levy fell outside its legal mandate despite being responsible for collecting the duty.
