On 28th November, 2023 the High Court quashed the Housing Levy. The verdict on Finance Act, 2023 petition was delivered by a three-judge bench consisting of Justices David Majanja, Christine Meoli and Lawrence Mugambi at the Milimani Law Court. The housing levy was among issues deliberated upon and the court declared it unconstitutional, further prohibiting the government from collecting funds from public.
The levy was declared discriminatory in nature as it only applies to employed and salaried workers while leaving out informal and non-employed workers without reasonable grounds. In addition, it was noted that the levy is not anchored on any legal framework and is in violation of article 10 of the 2010 constitution.
The government, through their legal representatives applied for a 45-day stay before effecting the ruling, citing serious, irreversible economic consequences, among other reasons-if the ruling was to be effected immediately.
“If we are to stop this, we need to make necessary adjustments. It is 28th November today and most entities have already deducted salaries from their employees for remittance. We need time to consider this fact. It is also possible that contracts had been entered into, and we need to consider the legalities to avoid legal issues relating to breach of such contracts,” said Honourable George Murugara, while speaking on behalf of the respondent during the proceeding.
The petitioners were also given opportunities to share their thoughts on the stay application. The Law Society of Kenya (LSK) dismissed the stay application noting that the “application is highly speculative” and that the housing levy is not collected through an automated system but is remitted manually by employers. LSK further requested the court to consider directing KRA to effect refunds of money that has been paid and collected.
Azimio also opposed the stay application. A representative of the coalition argued the reasons for suspending the levy – the fact that it is not sanctioned in any legal framework and it is discriminatory (among others) are enough to declare an Act of parliament invalid. They further urged the court to dismiss the application.
The Housing Levy is one of the most debated elements of the Finance Act, 2023. The Kenya Kwanza government introduced the levy to fund its ambitious affordable housing plan, meant to deliver housing units to low-income earning Kenyans. Initially, the levy required employers to deduct and remit 3% of their employees’ salaries and to further match the 3% deduction in their remittances. The deductions were later reduced to 1.5%.
The Finance Bill was passed by Kenyan parliament on June 22nd, and assented into law by President William Ruto on June 26th. Multiple petitions were filed, leading the High Court to suspend the implementation. The court of Appeal later lifted the suspension after which several petitioners, including, the Law Society of Kenya, Senator Okiya Omtatah and the Azimio One Kenya Alliance Coalition and others filed petitions to stop the Act’s implementation. The petitions were consolidated, leading to the November, 28th ruling.
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