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Relief for Kenyan Taxpayer following Court Order on new Housing Tax



It is relief for the Kenyan taxpayer and a blow to the government following a decision by the Employment and Labour Relations Court to suspend the planned 1.5 percent housing levy.

Justice Hellen Wasilwa on Wednesday granted the order following an urgent application by the workers’ umbrella body, the Central Organization of Trade Unions (Cotu).

COTU, through lawyer Okweh Achiando, argued that the tax on the basic salaries of all employees in the public and private sectors was against certain constitutional requirements and the Employment Act of 2007.

Section 31A of the Act, amended by the Finance Act 2018, was supposed to take effect on January 1, 2019, to contribute to the Housing Development Fund.

Lawyer Okweh Achiando said the deductions will have far-reaching implications on the right to fair remuneration and guaranteed labour rights.

“Regulations have not been developed to guide the implementation of the levy. It is also worth noting that there was no public participation in the amendment which was brought through the omnibus Finance Act, 2018,” noted the lawyer.

He further said the implementation of the levy will force employees into servitude and result in widespread public discontent.

The workers’ umbrella body also faulted the government for the action claiming it defies and threatens good order.

In a sworn affidavit, COTU boss Francis Atwoli argues that the introduction of the tax will result in an increase of price levels across sectors in the country.

“This will occasion increased inflation which will reduce the purchasing power of Kenyan’s masses and in turn make the lives of Kenya’s poor millions unbearable,” notes Atwoli.

The law contains a 1.5 percent contribution by every employee with a matched contribution from the employer, with a set maximum contribution of Sh5,000 monthly.

It will be the employer’s duty to remit both sets of contributions, by the ninth day of the following month.

This would see Treasury raise Sh57 billion annually to finance the proposed National Housing Development Fund. Affordable housing is one of the main pillars of the President’s Big Four Agenda under which the Government intends to build 500,000 new houses by 2022.

Justice Wasilwa directed COTU to serve its suit papers to Finance Cabinet Secretary Henry Rotich, his Transport and Infrastructure counterpart James Macharia, and the Attorney-General ahead of the hearing set for January 21.

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