1.)As has been stated, tax compliance in the Real Estate sector and specifically on rental income has been declining over the years. In this period,the taxes remitted to the Treasury by the players in the industry did not commensurate with growth in the real estate industry. Thus the government through KRA had to look for ingenious ways of ensuring compliance in the industry.
2.) Important to note is the fact that rental income is as well a specified source of income as is employment and business income as per the Income Tax Act. And has to be brought to charge without a blink. Business and Employment income has been taxed without much contest over the years. And fairness has to be seen exercised across the board(Rental Income too).
3.)Payment of PAYE is done by the employer yet borne by the employee. VAT too is made by supplier yet borne by the buyer. The employer just acts as an agent of the Treasury in collecting this tax so is VAT. And it has so far worked well if not excellent I believe,more so for PAYE. The same could be replicated to this tax on rental income. The MAJOR DRAWBACK here would be supposing tenants failed to remit that proportion of rent to KRA, who would bear the penalty?? That remains to be known....though it has been mentioned in the article that a legislation is in the process, those are some of the issues that ought be addressed before such a legislation is adopted as someone mentioned earlier in the thread.
4.)A flat rate on gross implying no expenses will be claimed could be a double-edged sword. To some landlords it could be a reprieve while to others a pain in the neck;while compared to the current regime of the graduated scale.
5.)Another critical question is, how will this flat rate be determined? And what assurance is it that it will not be a subjective rate?
If successful, it could be a step forward. However, imperative to note is that such a regime can never be welcome to all as tax has never been a
bread and butter situation, *remember Benjamin Franklin quote on death and taxes.*