Popular alarm over an alleged new tax on rental income in last Thursday's budget is misguided. There is no new tax. Net rental income after expenses has always been taxable at 30 per cent. The only change is that the Kenya Revenue Authority has promised to crack down on landlords to make certain that they pay.
The KRA is going to use GPS technology to map out Nairobi to determine which buildings are being rented out. The potential income is huge. Assume that half the the one million households in Nairobi pay an average rent of Sh40,000 monthly. That should be an annual tax income of around Sh6 billion for Nairobi alone. The KRA is collecting far less than that.
Yet Kenya is facing a budget deficit of over 10 per cent (excess spending over income) that threatens the country's financial stability according to the World Bank. Rather than increasing taxes and penalising law-abiding citizens, the KRA should pursue unpaid taxes. Rental income is a good place to start.
Tenants should support this initiative because the extra taxes will strengthen the economy. They should not collude with elite landlords to evade paying taxes for fear that their rents may go up.
Quote of the day: " Many suffer so that some day all Irish people may know justice and peace." - Irish nationalist Theobald Wolfe Tone was born on June 20, 1763