The Law Society of Kenya (LSK), headed by President Eric Theuri, on Monday, May 22, differed with President William Ruto's proposal of a blanket 3 per cent housing levy for all salaried individuals.
Appearing before the Departmental Committee on Finance and National Planning, Theuri argued that the levy would significantly affect an individual's income, arguing as a majority were already grappling with a preternaturally high cost of living.
The LSK President also took issue with the regime's decision to make the levy mandatory.
Instead, Theuri suggested that the levy should be voluntary depending on an individual's housing situation.
"To create a mandatory tax that reduces the take-home of every hardworking Kenyan irrespective of their housing circumstances is a proposal that flies against the provisions of article 201 of the Constitution.
"If it is a contribution, I would be happy that we call it a contribution, then it should be voluntary. As long as it is imposed by Law, in the very essence however you look at it, then it is a tax. It has a defect of reducing the income that someone has," the President told the panel.
"I think it is well-intentioned and perhaps, the detail is getting lost in the fact that it is being imposed by Legislation," he added.
In the proposal, the Head of State noted that the levy aimed to strengthen the housing fund to deliver the affordable houses he promised in his manifesto.
The current administration aims at delivering 200,000 units every year with a purchase range starting at Ksh1 million and stretching out to Ksh5 million or more, depending on the size.
In an address on Sunday, May 21, Ruto maintained that the mandatory levy would be in place since the housing fund was a collective business for Kenyans.
“Many people have questioned me why I am bothering them with all of this; some are asking me whether they asked me for a house and why I want to deduct their money. This country belongs to all of us.
“It is our collective business as the people of Kenya to make sure that we work together for this nation and we must carry everybody along," he told a congregation during the interdenominational prayer service in Isiolo Boys High School.
Turnover Tax
The housing levy is contained in the Finance Bill 2023 alongside a new proposal seeking to increase the turnover tax from 1 per cent to 3 per cent.
In his submissions, Theuri argued that the tax would affect the informal sector and discourage more entrants.
The LSK President, therefore, advised the state to maintain the turnover percentage and attract more entrepreneurs to expand the tax base and realise its revenues.
"If we increase the turnover tax for the informal sector from 1 per cent to 3 per cent when it is just a growing sector.
"Considering that this is a tax that was introduced a few years back, it will have the effect of discouraging more people from coming in," he explained.
The National Planning Committee, chaired by Kimani Kuria, will host hearings on the Finance Bill 2023 for two weeks.
