Gov't now says there is room to amend proposed housing levy

The government now says there is room for making changes to the proposed National Housing Levy as contained in the Finance Bill before the second reading on Thursday.

PS for Housing and Urban Development Charles Hinga challenged Parliament's Finance Committee to use its powers to make the necessary changes on the Bill with the input garnered through two weeks of public participation.

The PS at the same time maintained that the levy will be beneficial to employee contributors as the fund will not be subjected to tax on maturity.

The PS, whose office the bulk of the housing project will be implemented, appeared before law makers to explain the proposed workings of the National Housing Development Fund. He was hard pressed to explain exactly what the 3% contributions are.

"This is a tax, you're forcing even the poorest Kenyans to pay tax to build houses for those in Nairobi,” Turkana South MP John Ariko, who sits on the Finance Committee, said.

"If you look at the principle of paying taxes, there is not necessarily a direct relationship between what you pay and what you get but this Housing Levy confers you a direct benefit. If you want to argue from a technical perspective; is it a tax because it takes a mandatory shape," said Hinga.

The housing levy has attracted criticism over what has been  termed as discriminatory policies that seem to favour the rich over the poor, the lack of clarity over its governance structure and the safety of the monies collected as well as the criteria that will be used to determine who qualifies to benefit from the affordable houses the government intends to build using the fund.

While previously the government has maintained that the finance bill would be approved without changes, the PS appears to be amenable to a few tweaks here and there.

"We may disagree on the approach and there are contentious issues in the Bill that need to be cured and I hope this Committee will do so. We can correct it but let's not lose focus of why we are doing this. We are doing this because we have come to a point of reckoning," said Hinga.

The Finance and National Planning Committee is set to retreat for its report writing on Wednesday with sources intimating that the bill could be changed to factor in the views from the stakeholders, especially the Federation of Kenya Employers (FKE).

In its presentation to the committee, FKE had indicated that the 3% mandatory proposal would lead to job cuts and proposed that the levy be voluntary.

Sources now indicate that behind the scenes engagement between the government and the employers have seen government cede ground and considering the possibilities of reducing the levy by one percent to bring the proposed  rate  to 2%.

This offer is on the table as the Committee seeks to prepare the report for the second reading in Parliament next week.

The Committee will also be looking into what it termed as the legal framework that will inform the operations of the fund should it become law.

At the same time, the PS has clarified that amongst the changes the government will make to the proposals is the provision that will ensure that all contributors to the fund are eligible to benefit from the houses constructed as opposed to now when some cadres of employees are to contribute but not benefit from the project.