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The National Housing Development Fund (III) – The Taxes We Ought (Not) to Pay


Part I of this article briefly reviewed the history of the National Housing Development Fund (NHDF), now to receive contributions via a contentious mandatory housing levy on all employees and employers. Part II highlighted the primary problem with the housing levy: the problem of unjust taxation. Unfortunately, as was elaborately explained in Part II, this unjust taxation is cultivated by the characteristics of a modern State that undermines good intentions and turns them into selfish ones, encourages overt egotism in private actions (including the actions of the individuals who comprise the modern State), and portrays non-egotistic actions as onerous constraints on individual freedom. All of this holds to the extent that we experience ourselves as living under the rule of a modern State understood as such – a view that seems prevalent in Kenya’s university education generally. Against this background, it is no wonder that, be it in their personal or official capacities, the individuals who comprise the State appropriate institutions and resources for selfish aims, including the compulsory contributions to state revenue that we call taxes and, more particularly, the infamous housing levy.

At this point, an overview of the principles of a just tax is apposite to the discussion. According to the classical definition, justice aims to give to each person what is his due.[1] A just tax, then, will demand from the citizen what the political authority deserves from him – no more, no less. It pertains to the political authority to order the community in such a way as to achieve, to the greatest extent possible, the perfection of that community.[2] The authority does this by promulgating and enforcing laws, and by establishing the material, educational, and other cultural conditions that are conducive to the community’s perfection. The members of this community, that is, the citizens, have a corresponding obligation to obey the just laws enacted by the political authority and to contribute what is necessary to enable the political authority to perform its functions. Since this article focuses on the material contributions of citizens to the common weal, we must examine where those material contributions come from to pinpoint what the citizens are obliged to contribute. In brief, the question we are now considering is: how is wealth produced?

Ultimately, it is land and labor that produce wealth.[3]

Land, considered as such, cannot have duties since it is an inanimate object. Therefore, naturally occurring resources (e.g., trees, water, etc.) should be freely available for use or consumption. As Adam Smith recognized, it is the institution of private property or, in more expressive terms, private sovereignty over property[4] that puts a price tag on these resources – and unjustly so.[5]

Labor is an act of the human person that transforms the world around him. Labor is responsible for all human-generated wealth, and to the worker belongs the fruits of his labor. Yet, since every person is sustained in existence by his compatriots, by the entire political community, he owes a portion of the fruits of his labor to them, for they make his labor possible. Take, for instance, the journey of a single loaf of bread on any person’s breakfast table. Wheat is planted, cultivated, and harvested in one part of the country, transported elsewhere, ground into flour and turned into bread, packaged and transported to wholesale and retail shops operated by legions of people, and so on.

Finally, the labor of people in a location causes the value of land in that location to increase. This happens because of various factors, such as proximity to wealth (people do not have to travel as far as they used to when they want to purchase goods, for instance), faster exchange of information or resources (due to improved telecommunication infrastructure, for example), etc. Therefore, any person who owns a parcel of land owes a portion of the value of that land to those around him and, ultimately, to the political community. We can conclude, then, that, in terms of taxation, a citizen owes the political community a portion of the fruits of his labor – he may pay an income tax, for example – and a portion of the value of his land, specifically that portion due not to his labor, but rather to the economic activities of the community around that piece of land.[6] The purpose of this contribution is to enable the political authority to fulfill its duties. The authority should demand no further tribute from the citizen.

However, at the moment, Kenyan citizens, especially the poor, are beset by an incredibly unjust and onerous – and increasing – tax burden. To give a sense of how heavy the burden is, in 2022, 52% of Kenya’s tax revenues came from consumption taxes.[7] Apart from the fact that consumption taxes do not correspond to the principles of just taxation as outlined above, consumption taxes disproportionately affect persons who earn a lower income. These people spend a larger portion of their income on consumption, as opposed to people earning a higher income, who have a greater proportion of income to save or invest. After all, a person can only eat so much. The average monthly wage of people working in the formal economy is KES 72,130. That isn’t much when almost half of all Kenyan households have at least two children to support.[8] When we add to this the fact that about 84% of working Kenyans work in the informal economy and earn, on average, KES 4,000 to 8,000 per month,[9] the situation suddenly becomes dire. Granted, the housing levy may not affect many informal enterprises, over 85% of which were not tax compliant as of 2016.[10] Yet even in 2016, a significant proportion of informal enterprises were slowly shifting towards formality, including compliance with tax regulations.

The housing levy only adds to this burden, raiding the wages of the vast majority beyond the bounds of the already-high income tax. Yes, it is indeed unclear whether the funds will be used for affordable housing or diverted to general government coffers – let alone party or private pockets. But focusing on this only obscures a more fundamental contention. As wage laborers languish, enormous tracts of land remain idle in the hands of speculating landowners, and many landowners reap huge, unjust benefits from the increase in the value of their land caused by the economic activities of people surrounding their land.

[1] See, for example, Aquinas, T. (1947 ed., Benzinger Bros.). Summa Theologica. (Fathers of the English Dominican Province, trans.). II-II, q. 58, a. 1. Accessed at Original work published 1265-1274.

[2] This necessarily includes the perfection of the persons who make up the community. A community is not an aggregate of individuals with no relation to one another, like the stones in a heap of gravel. Rather, a community is comprised of persons who are profoundly and intrinsically united to each other almost like friends are. Each belongs to the other; each is responsible for the other; each is deeply part of the other.

[3] Most of the divisions of capital are, in fact, aspects of land (natural capital) or labor (human capital, instructional capital, and social capital), or a combination of the two (public capital). Labor is an act of the whole human person and, therefore, all his capacities and relations are involved in his work. As for land, it necessarily includes all the resources that are naturally present in any location. These resources only become secondary materials (including technological equipment) through the action of labor.

It is crucial to note that financial capital (in the final analysis, money) does not produce wealth. At any point in time, it serves one of two functions. Either it serves as a means of exchange (facilitating the distribution of the products of land and labor to other people for their value-generating use or consumption) or as a store of value. The apparent increase in the value of money held as a store of value is not a true production of wealth. At the risk of oversimplification, we may say that the valuation of money (in the form of securities, for instance) in the market represents how much money people are willing to pay to obtain higher sums of money in the future. Increases in this value are increases in the amount of money people are willing to pay. But the value “stored” in the money involved in these transactions is nothing other than the (perceived) value of land and labor and their products. A simple demonstration of this principle: the more goods a country produces, the cheaper they are to buy in that country. Therefore, the “increase” of wealth in these markets comes, in one way or another, from the pockets of those who work to produce that wealth.

[4] Here, we refer above all to the ius abutendi (literally translated as the “right to abuse”), the so-called “right” to make use of one’s property for selfish purposes, even to the point of wasting or destroying it.

[5] See Borruso, S. (2005, August 31). “Leggi economiche, etica e paradossi: C’è via d’uscita?” [Economic laws, ethics, and paradoxes: Is there a way out?] Signioraggio Network. Accessed at on 17 July 2023.

[6] This concept is not at all novel or even outdated. The contemporary term “land value capture” at least approximates the concept. See also an article recommending land value taxation as an alternative to the housing levy: Manji, A. and Ghai, J. C. (2023, May 24). “Raiding wages – Kenya’s proposed housing levy”, Review of African Political Economy. Accessed at on 17 August 2023.

[7] Oxfam (2016, December 12). Tax battles: The dangerous global race to the bottom on corporate tax. Oxfam. Accessed at on 17 August 2023.

[8] Kenya National Bureau of Statistics (2022, April). Kenya Population and Housing Census: Analytical Report on Household and Family Dynamics (Volume XI). Accessed at on 17 August 2023.

[9] Federation of Kenya Employers and International Labour Organization (2021, March). The Informal Economy in Kenya. International Labour Organization. Accessed at—ed_emp/—emp_ent/documents/publication/wcms_820312.pdf on 16 August 2023.

[10] Federation of Kenya Employers and International Labour Organization (2021, March). The Informal Economy in Kenya. International Labour Organization. Accessed at—ed_emp/—emp_ent/documents/publication/wcms_820312.pdf on 16 August 2023.

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Nyihamukoma & Co AdvocatesContact us
Advocates, Commissioners for Oaths and Notaries Public.
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