Whats this forced housing contribution?

Happy New Year! The Christmas festivities are over and we are now braving the dreaded Njaanuary.

I know majority of us over spent during the prolonged festivities before the reality of fees as school re-open. I have also awoken to the reality of the housing tax, which the Government intends to levy from employees to fulfill one of its Agenda Four objectives. I find this tax very oppressive and imposed unilaterally that should be rejected at all costs.

Lucy, Nairobi

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The Government recently introduced a new mandatory monthly contribution to the National Housing Development Fund of 1.5 percent of the employees’ basic salary.

The levy which, is popularly referred to as the housing tax will however take effect after appropriate regulations are gazetted.

Much as the tax seeks to provide housing in line with the President’s Agenda Four, the Government should consider reviewing the levy following growing stiff public opposition.

It is particularly harsh for low income earners who have to brave a torrent of other taxes – a situation many trade unionists have labeled double taxation.

It can also be argued that employees in the country carry a heavier burden compared to other taxpayers which contravenes the canon of equality and equity.

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For instance, The Kenya Economic Survey 2018 indicates that Pay as You Earn (PAYE), which is tax on employment income, is the second highest source of government revenue after Value Added Tax (VAT), contributing over KShs 300 billion to the exchequer annually.

According to the survey, only about six percent of the population is in wage employment which translates that employees are contributing a disproportionate amount of the Government revenue.

In addition to PAYE, the Kenya Revenue Authority (KRA) seeks to raise more revenue from employees through VAT, Import Duty and Excise Duty!

Moreover, with the institutionalized corruption, the public is worry of Government initiatives where mega financing is involved as funds disappear without a trace.

For instance, public contributory schemes like the National Health Insurance Fund (NHIF) and National Social Security Fund (NSSF) are currently engulfed in crises over fraud. What will cushion the housing fund from the looters?

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There are also arguments from other quarters that although the constitution provides for access to proper housing, housing is majorly a private matter.

Currently, many employees invest on private houses through various Saccos which they save for.

The Government will then be hard pressed to explain why employees should be ‘compelled’ to build houses for others.

It can be agreed that to alleviate the heavy burden on employees, the Government should consider practical ways of easing the tax burden including widening the tax bands which are extremely narrow.

The Government can also consider roping in the informal economy in the tax bracket – for instance, the presumptive tax under the Finance Act 2018 to be paid when obtaining business permits.

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 The writer is an Advocate of the High Court of Kenya.

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Big Four AgendaNational Housing Development Fund