Court now suspends new housing levy

News

Thursday, December 20, 2018 8:28

By GALGALLO FAYO

President Uhuru Kenyatta’s flagship low-cost housing plan yesterday suffered a major setback after the Employment and Labour Relations Court suspended the 1.5 percent levy that was to be charged on workers’ monthly pay to create a housing fund.

Justice Hellen Wasilwa suspended the levy, which was to take effect on January 1, following an application by the Central Organisation of Trade Unions (Cotu), which is opposed to the levy on grounds that the public did not participate in its creation and there is no guarantee of transparency during its implementation.

“An interim order suspending Section 31 A of the Employment Act, 2007 as amended by Section 86 of the Finance Act, 2018 ... is hereby issued, pending inter-parties hearing and determination of the application on January 21, 2019,” the court ruled.

Parliament passed the law establishing the levy as part of the Finance Act, 2018 despite opposition from unions and employers.

The Treasury Cabinet Secretary, his counterpart in the Ministry of Transport, Infrastructure and Housing and the Attorney-General are listed as respondents, while the Federation of Kenya Employers (FKE) is listed as an interested party.

Cotu secretary-general Francis Atwoli says in an affidavit before court that introducing the levy has far reaching implications on fair remuneration and workers’ labour rights.

Mr Atwoli, through the law firm of Okwe Achiando, had asked the court to suspend the levy, arguing that if the deduction takes effect and the court finds the levy unconstitutional there will be no remedy as deducted funds will not be returned.

The National Treasury had proposed 0.5 percent of the gross pay per month to be matched by employers at the same rate, but the MPs rejected the proposal arguing that it would impose a significant cost burden on companies while hurting the workers.

President Uhuru Kenyatta then reinstated the levy through a memorandum to Parliament on sections of the Finance Act that he did not agree with and also increased it to an even higher rate of 1.5 percent.

Contributions are capped at Sh5,000 for high salaried workers, which must be matched by equal contribution from employers. Employees are expected to reclaim contributed funds to purchase affordable homes if they qualify.

If not, the funds may be transferred to a pension scheme, another beneficiary or cashed out after 15 years of contribution or retirement, whichever is earlier.

Creation of the fund is meant to help the government realise the goal of delivering half a million affordable housing units in five years, as one of the four pillars of Mr Kenyatta’s agenda in the next four years.

But Mr Atwoli said there was no public participation since the law was introduced in Parliament through a presidential memorandum and passed as part of the Omnibus Finance Act, 2018, noting that the move is beyond the threshold for limiting citizens’ rights, and violates right to property.

He argues that the deductions are being effected even before regulations governing the fund are enacted, noting that such a move is against good governance, accountability and transparency.

Teachers, through Knut secretary-general Wilson Sossion, have also opposed the levy and demanded a review of their salaries as a pre-condition to its implementation.