Court suspends housing tax

Implementation of highly unpopular levy put on hold pending hearing of suit

In Summary

• Judge Maureen Onyango postpones implementation of  Ministry of Transport directive until case is heard.

• COFEK says Housing Fund levy is illegal, unconstitutional, discriminatory, oppressive, irrational, without basis and is not a priority for Kenyans.

High-end residential flats in Nairobi's Ruaka area
DECENT HOMES: High-end residential flats in Nairobi's Ruaka area

The High Court has temporarily suspended deduction of 1.5 per cent of employees’ salaries towards the Housing Fund until May 20.

Labour Court Justice Maureen Onyango issued temporary orders suspending implementation of a gazette notice by the Ministry of Transport until a case opposing it is heard.

A similar case opposing implementation of the notice was filed on Monday by the Federation of Kenya Employers and it will be mentioned on the same date, May 20, 2019.

PS Housing and Urban Development Charles Hinga directed employers to contribute 1.5 per cent for each employee.

I will grant a temporary stay till May 20, 2019. I direct that the applicant consolidates the case with another similar matter before Justice Hellen Wasilwa
Labour Court Justice Maureen Onyango

Consumer Federation of Kenya (Cofek) through their advocate Henry Kurauka filed an application challenging the implementation of the order which was to take effect at the end of this month.

Kurauka argued that the notice offends a number of constitutional articles since there was no public participation and it doesn’t allow for cultural diversity. 

“The Ministry has been planning without informing members of the public particularly employees and those in informal settlements,” he said.

Kurauka said the Housing Fund levy is illegal, unconstitutional, discriminatory, oppressive, irrational and without basis and is not a priority to Kenyans.

“There are more pressing issues like 13 counties being ravaged by hunger, drought and farmers unable to secure farm input in time,” he said.

Cofek said implementation of the Housing Fund levy will increase unemployment as employers will opt to cut down their workforce to cope with inflation.

“The scheme does not guarantee that all contributors under the scheme will get houses after investing their money,”Kurauka submitted.

He said the levy is oppressive and unfair to many citizens such as those who own houses, are retiring or are about to retire.

The FKE argued that the 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 Sh200 minimum per month for 15 years, it is superfluous and absurd that the Sh36 000 collected by the fund will purchase a house of whatever quality.

They also noted that the fund has no mechanism of immediate cash refund together with applicable interest rates. The fund is styled as though it is a deposit–taking enterprise, which offends the Banking Act.

“It is unreasonable to compel a citizen who will not secure a house to contribute towards house ownership of another person without corresponding benefit,” he said.

Kurauka said the levy will lead to unjustified over-taxation of Kenyans. There is no law that compels social security on an individual’s housing. Housing is a private arrangement. Some communities like the Njemps do not allow formal modern housing designs.

“Members of the public are at a loss as to how the levy will be operationalized owing to the fact that there is no inclusive statutory body corporate that is representative of diverse interests,” he noted.