Labour court issues fresh orders suspending housing tax

The Labour court on Wednesday issued fresh orders temporarily stopping the government from implementing the 1.5 per cent levy for the housing fund.

Justice Maureen Onyango issued the order, saying the suspension would allow the consolidation of the current case by Consumers Federation of Kenya (Cofek) with another earlier filed by the Central Organization of Trade Unions (Cotu).

In its application, Cofek says it is "unreasonable to compel citizens who will not secure a house to contribute towards house ownership [by] another person without corresponding benefits".

It also says the levy will lead to "unjustified over-taxation of Kenyans.

The organisation further notes that there is no proof that consultations were done before section 31 (a) of the Employment Act, which introduces the levy, was inserted into the Finance Act.

THE LAW

The deduction became law following the enactment of Finance Act, 2018, that followed the budget statement presented to Parliament by Treasury Cabinet Secretary Henry Rotich.

And in a newspaper advertisement on Tuesday, the Housing ministry and the Kenya Revenue Authority announced that the levy “has come into effect”, meaning every employed Kenyan would remit 1.5 per cent of their basic salary for April to the National Housing Development Fund.

The Jubilee administration is keen on the project as affordable housing is one of the four pillars of President Uhuru Kenyatta's Big Four agenda.

However, there has been opposition from the public, questions including the fate of people in mortgage plans and if it necessary for Kenyans who own houses to make the contributions.

The Labour court first suspended the directive in December 2018 following an urgent application by Cofek, the workers' umbrella body, which challenged its legality.

The Federation of Kenya Employers has also opposed the plan to effect the deduction from all employees in the public and private sectors.