A lot of dust has been raised following the June 14 announcement of proposed tax measure by Finance Minister Mr. Njeru Githae to have the Kenya Revenue Authority (KRA) collect 30% from rental income refers.
Speaking during a press conference on budget proposal to tax commercial and residential rent at the Panafric Hotel, Stephene Mutoro, Secretary General for the Consumer Federation of Kenya (COFEK) said: “KRA doesn’t have immediate capacity to map out the landlords and in any case if they did, the issue of standard rent as envisaged under the Rent Restrictions Tribunal Act Cap 296 doesn’t exist.”
The move will raise revenue of at least sh. 90 billion annually but there is no doubt that devious landlords will take advantage to immediately raise rent by 30%, at the demise of the tenants, without evidence of remitting the same to KRA.
COFEK is now seeking an urgent meeting with the Treasury and KRA to deliberate on the effective date of the proposed taxation until mechanisms are in place to address tenant protection.
“There is no logic to impose a blanket property tax and we plan to lobby MPs to reverse the tax measure in the public interest,” said Stephen. As majority manufacturers of various consumer products are equally tenants, the additional costs will inevitably trickle down to increased community prices to the end consumers and tenants.
Long term contracts are now faced with the risk of a mandatory review to incorporate the new development. The likelihood that the under- resourced Rent Restrictions Tribunal will have the capacity deal with the massive number of legal disputes is very low.
The move to tax commercial and residential rent raises fears of bank defaulters on mortgages. There is a real risk that this will slow down investments in the property and further deepen the low supply against high demand for both commercial and residential housing.
“The on and off removal and reinstatement of duty on imported clothes is a sign that treasury policies are disjointed. Rent is market driven on the basis of the willing buyer and seller, the frequent changes will be a challenge” added Mr. Mutoro.