“No one wants to build a house when they can barely afford to put food on the table.”
The signing into law of the Finance Bill 2018 unleashed a heavy tax burden to be borne by the common mwananchi. Among the range of new taxes introduced, competing to rob Kenyans of the little they have, is the housing development fund tax. It entails a 1.5% mandatory levy on every worker’s gross salary with a maximum deduction pegged at Ksh5,000, meaning those with monthly income of more than Ksh166,000 will contribute Ksh2,500, with the employer matching the same.
Proponents of the fund argue that it is meant to help the State realize its goal of delivering 500,000 affordable housing units in five years as a means to stop the expansion of slums and informal dwellings in major towns in the country. A noble venture at face value but the devil is always in the details.
In an article by Adelaide Waithera, a senior tax consultant at Ernst & Young, she lists some reasons why the fund has faced a lot of resistance from the public.
“The employers are against introduction of contribution towards the NHDF mainly because this would increase the wage bill. Employees on the other hand are opposed to the proposed contribution for several reasons; first, it is not clear whether all contributors to the fund would eventually benefit from it.
Second, the public is afraid that the funds may be misappropriated. Third, some employees are already servicing mortgages for houses they have acquired privately and would still be compelled to contribute to the fund and lastly, this contribution is only imposed on employees and employers not on the rest of the public.”
The distrust the public has about the fund stems from the poor governance issues already experienced among State-sponsored funds such as the National Social Security Fund and the National Hospital Insurance Fund and it almost looks like the proposed fund is bound to suffer the same fate.
While the contributions towards the fund are supposed to enable Kenyans own a house under an affordable housing scheme, there is still not much clarity on what “affordable housing scheme” means and how the informal sector participates.
Twitter user @dnahinga opines that “The Housing Levy is set to solve a problem that has not been defined accurately. Like the SGR before it, feasibility will be done later. The size of the problem is Unknown. The solution will be singular, from tenderprenuers. And if it fails, it will be expanded.”
A construction project management professional based in Nairobi, Kenya. Reach me on: email@example.com