Showdown looms as workers reject Uhuru's housing tax

President Uhuru Kenyatta. [File]

A Government decree to employers to begin monthly deductions to workers’ pay from this month to fund the State affordable housing dream has caused a major public outrage.

The contest relates to whether the deductions are constitutional – a matter that is at the heart of an ongoing litigation, after a High Court suspended the implementation last December.

Affordable housing is one of the pillars of President Uhuru Kenyatta’s legacy. Under the Big 4 agenda the Government is to provide 500,000 decent, affordable housing units by 2022.

“These houses will dignify the dwellings of these people who live in the informal settlements yet are paying rentals that are for a dignified place,” the president said in a statement from then the Spokesman Manoah Esipisu in August last year.

And yesterday in an advertisement in newspapers, Charles Hinga, the Housing Principal Secretary directed employers to start remitting the Housing Levy Fund in May which is projected to collectively yield Sh55 billion a year, or Sh855 on average per worker a month.

But the public notice to deduct 1.5 per cent from the worker’s salary and match it with an equal contribution from the employer was immediately met with stiff objection from various stakeholders, many feeling the levy was an unnecessary tax for an already overburdened workers.

Outstanding issues

Among the outstanding issues is petitions filed in court by the employers’ umbrella body and the Central Organisation of Trade Unions (Cotu).

“The employers are required to deduct and remit the levy together with other statutory levies from both employer and employee by the 9th of each succeeding month together with other payroll statutory deductions,” read Hinga’s notice.

Kenya Revenue Authority receives the housing fund deductions equal to three per cent of the gross salary, besides income tax which is applied at a graduated rate of up to 30 per cent.

But yesterday, the Federation of Kenya Employers (FKE) termed the notice as “unlawful” as it had been set aside by a court, pending the determination of a petition challenging the legality of the fund.

Jacqueline Mugo, the Executive Director of FKE, said the deductions should not commence until the court makes its ruling following a prior extension that suspended the levy until May 20.

“This is a public interest matter and it is important to handle it as envisaged by the Constitution which requires consultations instead of ambushing employers with unilateral changes which will increase the cost of doing business and reduce employees’ purchasing power,” Mugo said yesterday.

She added that the case filed in court would come up again for mention in May before “further directions,” are issued pending the hearing and determination of the petition.

In FKE’s suit, Mugo asked the court to overturn a decision by James Macharia, the Minister for Transport, Infrastructure, Public Works, Housing and Urban Development, seeking nominees to the yet-to-be-established advisory board of the Housing Fund.

Francis Atwoli, the Cotu Secretary General, said he is consulting with leaders of respective 44 affiliated trade unions he represents before addressing the contested deductions on Saturday.

“There is not much to say (about the matter) now, but I will provide a detailed statement after further consultations this weekend,” said the trade unionist.

Kenya National Union of Teachers (Knut) is also opposed to the levy, saying the  proposed scheme would not be beneficial to the members. In an earlier statement, Knut secretary general Wilson Sossion said there should first have been consultations between the Teachers Service Commission, Knut and the government.

Extra tax

He added that the only way teachers would support the scheme was if their Collective Bargaining Agreement was reviewed to enhance their salaries to cushion them against the extra tax.

“Give teachers a salary rise of nine per cent straight and revise the CBA and we will roll it out,” Sossion said.

And yesterday his deputy Hesbone Otieno added that their members do not see the need to contribute to a housing scheme yet many are already servicing home loans.

“Our members are already having mortgage with various banks while some have bought plots and build their homes…. we shall have the National Executive Council to take the next action,” said Otieno.

Consumers Federation of Kenya Secretary General Stephen Mutoro warned that the scheme has the hallmarks of a scam.

“The Government cannot order individuals to own houses. The directive to employers to start deducting and remitting 1.5 per cent of workers’ pay plus their contributions to the government is a fraud,” Mutoro said.