Blow to Ruto administration as court declares Housing Levy unconstitutional

President William inspects the Kibra Affordable Housing Project on November 22, 2023. (Photo: PCS)

By Dennis Tarus
Tuesday, November 28, 2023

The court has further barred the government from collecting the levy from employees and employers.

A three-judge bench has ruled that the Finance Act 2023 amendment to Sec84 of the Finance Act amending the Employment Act introducing the Housing Levy is unconstitutional.

Justices David Majanja (presiding) Christine Meoli and Lawrence Mugambi on Tuesday said that the levy lacks a comprehensive legal framework and is irrational.

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"The levy violates the principles of taxation and as contained in the Finance Act 2023 is discriminatory and unfair for making the distinction between formal and informal sector thus creating unequal and inequitable principles and it is unconstitutional," Majanja ruled.

The court has further barred the government from collecting the levy from employees and employers.

"Housing levy is not one of the taxes the Kenya Revenue Authority (KRA) is empowered to collect under parts one and two of the First Schedule. Further, it is the minister or Cabinet Secretary for Finance, who is permitted to amend the schedule to authorize KRA to conduct a specific task," Majanja ruled.

The petitioners who included Busia Senator Okiya Omtatah, Azimio la Umoja Coalition and the Law Society of Kenya among others moved to court wanting the levy declared unconstitutional.

KRA powers

They argued that the Finance Act 2023 was illegal as the new provisions were introduced on the floor of the House without being subjected to public participation as required by law.

The petitioners also argued that the introduction of the levy did not exist in law – as it purports to give powers to the Kenya Revenue Authority to collect deductions – which is unconstitutional.

President William Ruto in June signed the Finance Bill into law which introduced the new housing levy.

The law contained the contentious provision which saw the introduction of a 1.5 per cent levy on the salaries of all tax-paying Kenyans that will be matched by employers to fund an affordable housing programme.

The President has been a staunch defender of the three per cent deduction on employees' pay for housing schemes, saying it contributed to individual savings towards owning decent houses.

Ruto insisted that the affordable housing programme spearheaded by the Kenya Kwanza government will ensure millions of Kenyans living in informal settlements own houses despite their meagre pay while at the same time provide job opportunities for thousands of youth in the process.