On Tuesday, Kenya’s High Court declared a 1.5 percent levy, introduced to fund affordable housing, unconstitutional. The levy was a provision of the Finance Act 2023, which faced legal challenges earlier this summer amidst mass demonstrations against the cost of living crisis in the country. Further details of the situation were reported by jurist.org.
The housing levy was part of the Finance Act 2023 proposed by President William Ruto’s government earlier this year. The court ruled that Section 48 of the Finance Act, which introduces the housing levy on formally employed workers, violates the principle of taxation as it makes an unjustified distinction between people employed in formal and informal sectors. The court deemed the bill arbitrary and discriminatory, as the government failed to provide a reasonable explanation for the imposition of the levy.
The bill also significantly raised fuel tax and increased the income tax rate for people falling into higher income brackets. The announcement of these measures resulted in mass demonstrations from the public in July. Opponents of the decision argued that these new taxes would put additional financial pressure on households amidst the rising costs of living in the country.
The incumbent government, however, argued that the housing levy is essential for providing affordable housing to Kenyans and urged the court to reconsider its decision. President Ruto declared that the law has intentionally targeted the housing sector to create jobs and to engage more people, especially the young, in productive work. His government has pledged to make necessary adjustments according to the court’s opinion, with the expectation that the housing levy will ease the fiscal burden of the Kenya government faced with increased financial risks. Referencing a statement by President Ruto here.
The High Court granted the request for a 45-day stay of the order from the lawyer representing the government. Currently, the government is assessing whether to appeal the ruling or amend the law to address the legal issues. The levy is being stayed until January 10, 2024.