(NAIROBI, KENYA) – Workers, traders and employers in Kenya risk bank account freezes, asset seizures and PIN deactivation as the Kenya Revenue Authority prepares to launch a crackdown on housing levy defaulters.
Changes to the law, which took effect on July 1, allow the tax authority to enforce collection of unpaid levies through tough measures already used on tax cheats and defaulters.
The KRA has been collecting the levy equal to 1.5% of gross pay or income from July 2024, but lacked the legal powers to crack down on defaulters. That allowed thousands of workers and firms to avoid payment.
The Finance Act 2026 closed the loophole and offered the KRA higher commissions for collection of housing levies. Collection in the year to June stood at KES 79.9 billion, or about $616 million and £487 million.
Housing Principal Secretary Charles Hinga said the government now expects greater bite from the KRA after the authority insisted on explicit legal powers before pursuing employers who deducted the levy from workers but failed to remit it.
Mr Hinga said on Friday that the KRA said it needed explicit powers to recover unremitted or unpaid amounts. 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 were paying tax but not the housing levy.
Default rates were found to be higher in the informal sector, where traders were not paying the levy and businesses such as corner shops, salons and bars were not remitting deductions from their staff pay.
The Auditor General’s checks revealed that 6,390 companies remit Pay As You Earn tax, which the KRA has powers to enforce, but not the housing levy.
Mr Hinga said the KRA would begin internal reconciliations to identify unpaid levy and enforce recovery. He said the authority is now able to assess, evaluate and prosecute taxpayers who have not remitted. Internally, the KRA will carry out reconciliations and do what it needs to do.
The levy, introduced in 2024, is intended to pay for the construction of affordable housing for low income Kenyans. It sparked an outcry from the opposition and a large section of the population who feel burdened by a raft of new taxes.
An earlier law 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 only.
Parliament responded by passing the Affordable Housing Act, 2024, which broadened the framework to include workers in the informal, or jua kali, sector. Collections resumed 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 the law as though they were unpaid tax liabilities.
The change has expanded the KRA’s enforcement mandate beyond ordinary taxes and allows it to deploy the same recovery procedures used against tax defaulters.
It will rely 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 under garnishee orders.
Non compliant firms and workers risk the suspension or deactivation of their KRA PIN, blocking business operations. The tax authority can place restrictions or secure claims on properties and land to recover outstanding public debt. Amounts of KES 100,000 or less may be recovered through summary procedures.
Until the amendments took effect, the KRA said enforcement of unpaid housing levy fell outside its legal mandate despite being responsible for collecting the duty.
The Affordable Housing Fund Board in submissions to Parliament argued that the tax authority needed explicit legal authority before it could act.
The board told the National Assembly’s Finance and National Planning Committee in June that the KRA had acknowledged the limitation, confirming that although it is mandated to collect the levy, enforcement falls outside its legal mandate. The board said it was engaging with the KRA, which is keen to assist in recovering all outstanding levy that has not been remitted.
Treasury records show housing levy collections have exceeded KES 200 billion since the levy was introduced in July 2023. Collections rose from KES 54.16 billion in 2023/24 to KES 73.20 billion in 2024/25 and KES 79.10 billion in 2025/26. That is about $1.54 billion and £1.22 billion in total.
Despite those collections, the Affordable Housing Fund Board estimates that more than KES 100 billion has been evaded. Employers, especially in the informal sector, are accused of failing to remit deductions. That is about $771 million and £610 million.
The scale of the suspected arrears looks set to turn the housing levy into one of the largest non tax recovery targets for the KRA.