Jump to navigation

Kenya

Ruto's housing levy is triggering mass dissent

The government says its new plan will help home buyers but it risks hurting low and middle-income workers

Pressure is piling on President William Ruto's government over planned tax rises in the Finance Bill due next week that has prompted the country's public service trade unions to petition Parliament to reject the proposals. They are threatening to mobilise a national strike should it be passed.

Their main targets are a house levy, value added tax (VAT) on fuel and the introduction of a turnover tax on small businesses.

The new taxes follow recent increases to the statutory contribution to the National Social Security Fund (NSSF) and National Health Insurance Fund (NHIF). Public sympathy for the cash government's cash flow crisis and need for increased tax revenues is ebbing fast. The increased cost of living fuelled by food inflation, a weak shilling that has lost over 15% of its value against the US dollar this year, and drought, are hitting living standards across the country.

The housing levy is being sold as a means to fund Ruto's Affordable Housing Programme (AHP) that promises to construct 200,000 affordable houses a year through public-private partnerships.

It is estimated that the proposed 3% compulsory deduction from people's pay packets will raise Ksh9 billion every month. The levy would be capped at Sh2500 ($20) per month, with employers obliged to top up a similar amount with an opt-out option after seven years.

The levy is compulsory and its flat rate hurts middle and low-income Kenyans far more than their wealthy counterparts but the government insists that the housing fund is a not a tax.

Trying to explain the levy's provisions, Charles Hinga, Principal Secretary at the Department for Housing and Urban Development, described it as a 'sweetheart deal' in a rambling exposition. He argued that anchoring the fund in law, as with the fuel levy, is vital to attract potential investors. Comparing the plan to a pension scheme, Hinga said it would enable the government to offer 20-30 year mortgages at lower interest rates than the high street lenders.

President Uhuru Kenyatta's government proposed a similar scheme but it was challenged in the courts and then quietly abandoned.

The high profile given to the housing levy under Ruto could distract attention from other equally questionable proposals in the Finance Bill. It is due to be read in parliament on 8 June.



Related Articles

Austerity the price of debt workout dodge

Determined to avoid lengthy finance talks, the President gambles he can fix the economy before the next elections

Will President William Ruto's strategy – austerity now, pre-election bonanza later – pay off as Kenyans face another year of spending cuts and higher taxes? Ruto calcul...


In the IMF fold - just

Nerves were calmed in the coalition government on 24 September when the International Monetary Fund agreed to release the second part of a US$36 million loan. The cash had been del...


Crossed lines

Britain's Vodafone PLC and the Kenyan government face awkward questions about the establishment of Kenya's largest mobile phone company, Safaricom, following the discovery that a h...


Kenyatta mulls the high cost of the handshake

Fresh from addressing UN and US officials on his country's political successes, the President faces a bumpy economy ahead of next year's elections

When he addressed the UN Security Council on 12 October President Uhuru Kenyatta joined other speakers to argue that mismanagement of ethnic diversity often caused political violen...


The warnings before Westgate

The growing politicisation and corruption within the state security system help explain the government’s poor coordination and its failure to act on warnings it received befo...