NAIROBI, Kenya
Kenyans will continue paying the Housing Levy albeit for the next one month, after the High Court suspended an earlier judgement that found the law unconstitutional until January to allow the government to move to the Court of Appeal.
The court suspended their
judgment until January 10, 2024 after the Kenya Revenue Authority (KRA),
attorney general and Speaker of the National Assembly Moses Wetang’ula pleaded
with the judges to grant them a stay, for at least 45 days.
“We have no doubt this court
has jurisdiction to grant orders of stay pending appeal even after declaring a
certain decision unconstitutional,” Justice David Majanja said in a short
ruling.
Justices Majanja, Christine
Meoli and Lawrence Mugambi ruled that they were of the view that they do
not have the last word on the matters at hand.
“The respondents are also
entitled to exercise the right of appeal, to the court of appeal and even the
Supreme Court. We are inclined to grant the stay for a temporary period,
pending the filing of the formal application at the Court of Appeal,” Justices
Majanja said.
In the earlier decision, the
three-judge bench dealt a blow to President William Ruto’s housing programme
after declaring the Housing Levy unconstitutional for being discriminatory and
creating unequal principles.
The judges ruled that Section
84 of the Finance Act, which amends the Employment Act to introduce the Housing
Levy violates the principles of taxation for making distinction between formal
and informal sectors, thus creating unequal and inequitable principles.
The court added that the
enactment of laws must be supported with a rational explanation but in the case
of the Housing Levy, the government failed to provide an explanation for the
imposition of the levy or a legal framework to anchor the fees.
All employees, whether on
permanent and pensionable terms or contract-based engagements, started
contributing to the Affordable Housing Fund since July 2023, when the act came
into force.
“An order is granted
prohibiting the respondent from collecting or charging or otherwise charging on
Affordable Housing Act based on section 84 of the Finance Act and all prayers
on the consolidated petition not specifically granted,” Judge Majanja who read
the ruling said.
The court, at same time, said
the Finance Act, 2023 is a Money Bill and the argument that the concurrence of
both Speakers of the National Assembly and Senate was required before the law
was enacted, does not stand.
Although the judges found that
there were anomalies in the passage of some sections contained in the Finance
Act, they were not serious to negate the law.
In the process, the judges
upheld the 16 per cent VAT on insurance premiums, the digital asset tax, and
the tax on betting, saying they were constitutional and within the mandate of
the Parliament.
Justices Majanja, Meoli and
Mugambi said it was wrong to argue that amendment of section 2 of the Finance
Act on Income Tax Act, which imposes taxes on entertainment, interferes with
the function of the county governments.
According to the court, the
amendment does not affect the functions of the county governments as argued by
Busia Senator Okiya Omtatah and other petitioners in the case.
Senator Omtatah had argued
that both speakers should have considered whether the Bill concerned counties
and if so, whether it was a special or ordinary bill and resolve the questions
before the Finance Bill was enacted.
The judges ruled that looking
at the evidence presented before them, the public participation conducted by
the National Assembly was sufficient.
In early August, the
government backdated the Housing Levy deductions to July 1, 2023, and appointed
the Kenya Revenue Authority (KRA) as the collection agent.
That was after the Court of
Appeal overturned an order suspending the implementation of the Finance Act
2023 after Treasury Cabinet Secretary Prof Njuguna Ndung'u argued that the
government was losing billions of shillings as a result of the freeze.
In a statement on August 2,
2023, the State Department for Housing and Urban Development said the levy
would be payable by the employee and the employer at the rate of 1.5 per cent
of the employee's gross monthly salary as outlined in the Finance Act 2023.
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