CONTROVERSIAL SUBJECT

FKE wants 'burdensome' housing levy reviewed

'We are questioning how both the 1.5 per cent for employee and employer was arrived at'

In Summary

• The introduction of the housing development levy was rushed since employers and employees were not consulted.

• The deduction of the levy will have far-reaching negative implications on the formal and informal sectors.

Federation of Kenya Employers executive director Jacqueline Mugo and Western Region FKE official Charles Owele in Kisumu
FKE STAND: Federation of Kenya Employers executive director Jacqueline Mugo and Western Region FKE official Charles Owele in Kisumu
Image: FAITH MATETE

The government's housing project funding will be burdensome to the employees, according to the Federation of Kenya Employers.

FKE executive director Jacqueline Mugo said the introduction of the housing development levy was rushed since employers and employees were not consulted.

The deduction of the levy will have far-reaching negative implications on the formal and informal sectors and at the same time undermine the rights and fundamental freedoms of employers and employees, Mugo said.

“Beyond the consultation is the fact that the quantum of contributions is an issue for us. We are questioning how both the 1.5 per cent for employee and employer was arrived at," she said, noting that this is not a figure that will ordinarily give anybody a house.

The FKE boss was addressing the 49th annual general meeting of Western Kenya FKE on in Kisumu on Wednesday. 

Section 30 of the Employment Act already tasks the employer to provide housing or house allowance to the employee tabulated at 15 per cent of the basic wage. This levy automatically increases that costs to 16.5% of the basic wage without justification, she said.

“A lot of employers have owner occupier schemes. Some (employees) are already on loans that are being serviced, hence the question of how this is being factored in is already an initiative of employers to provide housing to their staff.”

The employers also have an issue with the government structure proposed for this levy. Currently, there is no structure in place to accept the housing levy and to manage it in a way that will ensure a fair return to Kenyans.

The National Housing Corporation was not formed to manage this levy, Mugo said and proposed that the housing scheme be funded in ways that do not impose burdens to the business community and employers.

“If indeed there is a conviction that houses can be built by the state, then why doesn’t the government guarantee a financier or a business person who already has built houses to do so and later invite Kenyans who can choose to either rent or buy it?"

The FKE boss said the court injunction stopping the government from deducting the housing funds levy was still in force. The case will be determined on May 20.

"The Consumers Federation of Kenya (Cofek) has filed a suit before the court claiming the implementation of the housing levy fund is illegal and will lead to over-taxation. The court has ordered that the suit be enjoined with one filed by Cotu and FKE," Mugo said.

Employers, she said, must be given a chance to contribute on how the government’s Big Four agenda can be financed without imposing higher taxes and levies on business people.

The government had early this month directed employers to start deducting the 1.5 per cent housing levy from all employees from the end of the month. The directive has since been suspended amid public outcry

Edited by F. Mwaniki