The Employment and Labour Relations Court has once again suspended the notice for Implementation of the Housing Fund Levy until May 20, 2019 pending hearing of a suit filed by the Consumer Federation of Kenya (Cofek).
Lady Justice Maureen Onyango granted conservatory orders sought by Cofek through its Chairman Ephraim Githinji Kanake, Secretary General Stephen Mutoro and Henry Ochieng.
Through lawyer Henry Karauka, the three had sought to have the matter certified as urgent. This is the third time the court is suspending implementation of the controversial levy, which has received widespread opposition with many Kenyans terming it a fraud and impractical.
However, on Tuesday, Transport, Infrastructure, Housing, Urban Development Cabinet Secretary James Macharia and Kenya Revenue Authority Commissioner General John Njiraini placed a notice in the press instructing employers to begin deductions on May 9 this year.
The Finance Act, 2018, which amended the Employment Act, 2017 imposed a levy of 1.5% of each employee’s gross salary (by employers) and 1.5% (by employees) making a total of 3%. Any default will attract interest and penalty of 5% besides other penalties.
The notice further provides for voluntary contributions to the Housing Levy Fund at a minimum of Ksh 200 per month for the non-salaried citizens.
However, critics say the money is not enough to enable 75% of employees purchase houses under the low cost housing scheme that forms part of President Uhuru Kenyatta’s Big Four Agenda. The government is seeking Ksh 50 billion to construct 500,000 houses by 2022.
The Federation of Kenya Employers dismissed the notice as illegal, stating it had secured an extension on April 8 suspending the levy until May 20.
Cofek avers that there was no known public participation prior to insertion of Section 31A of the Employment Act, 2007 and prior to issuance of the public notice.
It also says the levy will lead to an unjustified over-taxation of Kenyans, adding there is no law that compels social security on an individual’s housing.
“Housing is a private arrangement. Indeed, the Kenyan Constitution at Article 11 allows and recognises diversity some of which does not allow formal housing designs such as the Njemps community,” adds the consumers lobby.
“Members of the public are at a loss as to how the Housing Levy Fund will be operationalised owing to the fact that there is no inclusive statutory body corporate that is representative of diverse interests. Based on the history of poor management of public funds, the Petitioner avers that it has legitimate concerns and fears that the Housing Levy Fund will not be managed any differently and as such it amounts to misuse of public funds,” the petition says.
“The said Housing Fund Levy is discriminatory and oppressive to those in informal employment and those who already own houses or those who do not wish to own more houses. Introduction of the Housing Fund Levy is not a priority in Kenya because there are more pressing issues such as 13 Counties being ravaged by hunger, drought and farmers unable to secure farm input on time; Health challenges and unmet expectations on NHIF, rising cost of living and poverty, among others,” it further adds.
Fears of job losses
The lobby also fears that implementation of the Housing Fund Levy will increase unemployment as many employers will resort to cut down their workforce to the detriment of the economy and contends that statutory amendments that increase cost of human resource will create job losses thus worsen the unemployment crisis in Kenya.
It says the levy does not guarantee that all contributors under the scheme would get houses after investing their money, noting it will be unfair, oppressive and discriminatory to many citizens such as those who own houses, are retiring or about to retire, People Living with Disability, senior citizens, low income earners, retrenched workers, the terminally ill workers, and so on.
“The said Housing Fund Levy promotes impracticality on emphasizing ownership as opposed to the modern trend of accessing housing. By implying, for instance, that a voluntary contributor can give Ksh 200 minimum per month for 15 years, it is superfluous and absurd that the Ksh 36,000 collected by the Fund will purchase a house of whatever quality. On the contrary, if the funds were invested in other ventures, they could earn higher returns,” Cofek avers.
It adds the Housing Levy Fund assumes there would be job security in private and public sector and even if job security was guaranteed, the Fund has no mechanism of immediate cash refund together with applicable interest rates. In any case, the Fund is styled as though it was a deposit-taking enterprise which offends the provisions of the Banking Act as read with the Central Bank Act.
The lobby wants Kenyans to be given sufficient to allow public participation and appropriate legislation, saying the government is unlikely to suffer any prejudice.
“The Housing Fund Levy will compel employees in private and public sector to invest in housing which may not be a priority to their individual needs thus infringing their constitutional right of utilising their earning according to their wishes. It is unreasonable to compel a citizen who will not secure a house to contribute towards house ownership of another person without corresponding benefit,” it adds.
According to Cofek, the levy is irrational because it does not factor the fact that some employees in private and public sector enjoy reasonable housing allowances and are members of home ownership schemes as part of their employment.
The lobby has sued Macharia and Attorney General Paul Kihara.