The proposed housing levy under the Finance Bill seeking to deduct 3% from salaried employees which will be matched by employers but not exceed Ksh.5,000 has been met with criticism from experts.
Experts state that the timing of the new proposed levy by the government is ill-informed given the turbulent economic situation in the country.
Analysts anticipate pushback on the new law stating that the initial proposal in 2019 which only sought 1.5% of employees’ pay failed.
The affordable housing project was birthed when former President Uhuru Kenyatta introduced the Big 4 Agenda which contained the housing project. Initially, the proposal sort to have employees contribute 1.5% of their salaries to the housing fund.
However the Employment and Labour Relations Court in 2018 suspended the levy following a petition from the workers’ umbrella body, the Central Organisation of Trade Unions (COTU).
The courts suspended the levy on the grounds that no public participation was undertaken and that transparency in its implementation was not guaranteed.
Analysts are now poking holes into the government’s plan saying the proposed taxes on housing would be hard to implement given that the first one failed and also considering the hard economic times that Kenyans are in.
”The bill seeks to have Kenyans contribute 3% of their salaries but the same government failed to have them contribute 1.5% we see a situation where people will go to court and oppose this,” Financial Analyst Churchill Ogutu said.
Further, the government has changed regulations guiding the housing fund, where unlike before, the defaulter will not be charged penalties and also the time limit where one can opt out of the scheme has been reduced.
“We have seen changes in the bill that seek to entice contributions including no penalties of failed payments and also the time limit in which one can opt out of the fund has been reduced,” Ogutu stated.
2.4 million Kenyans who earn below Ksh.100,000 per month are eligible for a mortgage under the affordable housing scheme, leaving out 77,000 high-earning employees who nevertheless will make the monthly contributions.
“The government will keep going to salaried employees because that’s the only tax they can collect. The majority of Kenyans are in the Juakali sector, but you have to ask yourself how will they be taxed,” PWC partner Titus Mukora noted.
In case of ineligibility for a home under the scheme, a contributor’s levy can be transferred to a pension scheme, to another person under the affordable housing scheme or cash out after exit.