Workers and employers reject proposal to create housing levy


Institute of Economic Affairs CEO Kwame Owino at a past event. Mr Owino has termed a housing levy a backdoor strategy by the government to raise revenue from heavily taxed formal workers. He said housing is largely a private affair. FILE PHOTO | NMG

Workers' unions, employers and lobbies have opposed Treasury’s move to introduce a housing levy, describing it as an unnecessary burden.

Workers’ unions and the Federation of Kenya Employers (FKE) said the levy is likely to lead to reduction in salaries and loss of jobs.

The Institute of Economic Affairs (IEA) Executive Director Kwame Owino termed the levy a backdoor strategy by the government to raise revenue from heavily taxed formal workers.

Mr Owino said housing was largely a private affair, adding: “The government needs to first seal loopholes, deal with errant civil servants and their accomplices to gain Kenyans’ confidence before asking them to make contributions towards the soon-to-be established National Housing development Fund (NHDF),” he said.

In his last budget, Treasury Secretary Henry Rotich proposed the introduction of a 0.5 per cent statutory levy on employees' gross salaries with a monthly maximum of Sh5,000 for high income earners and employers expected to contribute a similar amount for every employee to the NHDF.

The Kenya Union of Commercial, Food and Allied workers General Secretary Boniface Kavuvi said the government did not consult them and wondered how workers were expected to accept the new tax without any public education.

The Kenya Medical Practitioners and Dentists Union chairman Dr Samuel Oroko said the levy amounted to double taxation since Kenyans already pay income and Value Added Tax on nearly all products they buy.

“See all the billions being siphoned by civil servants all over the place as well as corruption that allows untaxed goods onto our retail shelves. The government must first make people who divert public funds to private use pay dearly,” he said.

FKE said most Kenyans were still suffering from the adverse effects of last year's prolonged electioneering period that disrupted the business environment and that most workers are heavily taxed at 30 per cent corporate tax. The federation said it will schedule a meeting with the Housing ministry to thrash out some of the concerns on the issue.

Corrupt practices

Its executive director Jacqueline Mugo said the talks will focus on governance structure of the fund, its implementation modalities and how companies with housing plans for their employees will be treated.

The government’s involvement in provision of housing has always been bogged down by corrupt practices. In 2012, an assistant minister and some top government officials allocated themselves houses at the National Housing Corporation (NHC) residential estates in Kileleshwa, Madaraka and Lang’ata.

Unionists and employers feel the estimated Sh2 billion monthly statutory kitty risks being abused since the government has resolved to eject workers and employers’ representatives from the National Social Security Fund and national Hospital Insurance Fund.

Central Organisation of Trade Unions Secretary General Francis Atwoli said issues touching on workers require representation to guard against embezzlement of funds and unwise investments. “NHDF remains an amorphous entity where neither workers’ nor employers’ representatives have been briefed. Such funds need supervision to ensure workers benefit to the last penny,’ he said.

Housing Principal Secretary Charles Hinga has strongly defended NHDF’s integrity, saying all funds received will be spent well and that individual contribution will be used as a guarantee for the housing units they choose.

According to the Kenya National Bureau of Statistics, formal workers in low-cadre up to lower-middle income group earning between Sh15,000 to Sh49,000 account for 74.44 per cent and are deemed legible for the government-fronted tenant purchase schemes.

A further 22.62 per cent in the middle income group that earns between Sh50,000 to Sh99,000 will be helped to access subsidised mortgages.

The upper income group with Sh100,000 and above numbering about 74,000 individuals are expected to meet their housing needs but will contribute a maximum of Sh5,000 towards the housing fund for the less fortunate.