Blow for Kenyans: Court rejects suspension of housing tax

Kenyans will continue to pay 1.5 percent of their gross salary as housing tax after the Supreme Court on Thursday rejected a stay of further implementation of the Affordable Housing Act.

A three-judge panel, comprising Justices Olga Sewe, John Chigiti and Josephine Mong’are, declined to issue interim orders suspending the housing levy pending the hearing and determination of the lawsuits challenging its constitutionality.

The petitioners include Busia Senator Okiya Omtatah and Dr Magare Gikenyi.

“We have no doubt that the affordable housing levy is an issue that has aroused great public interest. We are also convinced that the public interest speaks in favor of not granting the order, but rather hearing and deciding these applications as a priority,” the judges said.

While dismissing the plaintiffs’ applications, the judges agreed with the Attorney General, the Ministry of Lands, the National Housing Corporation, the Kenya Revenue Authority and the Commissioner General that it would be difficult to reverse the effects of the issuance of the orders because the contracts had already been signed and infrastructure projects had been initiated.

The three-judge panel was of the opinion that the court should take time to take this approach, particularly when it comes to questions of the constitutionality of laws.

“The applicants have failed to demonstrate that the impugned provisions pose a threat to life or the Bill of Rights that justifies the issuance of the orders sought,” said Judge Sewe.

However, the judges ordered that the six cases should be heard and decided as a priority.

“We are of the view that the applicants have not raised any arguments justifying an assurance of conservatorship orders. The applications of April 8 and 22, 2024 are hereby dismissed for lack of merit. We order that the matter be heard as a matter of priority during this period,” the judges ruled.

In March 2024, six petitions were filed against the Affordable Housing Act, calling it discriminatory against businesses.

The petitions include one filed by 22 senators led by Omtatah, Dr. Gikenyi and seven other human rights activists.

With their lawsuits, they want the court to stop the implementation of certain sections of the Affordable Housing Act of 2024.

The applicants are challenging a section of the new Act which provides for the appointment of the Commissioner-General of the Kenya Revenue Authority (KRA) as the collector of the housing levy, as well as sections 4 and 5 of the Act which regulate the collection of that levy.

They argue that the KRA Commissioner General cannot be responsible for collecting housing taxes because his powers are strictly limited to the affairs of the authority.

“The Commissioner General is not the KRA. It is the authority and not its Commissioner General that is given the mandate under Section 5 of the KRA Act to collect and account for revenue in accordance with established laws,” the court documents said.

Omtatah is of the opinion that the housing tax should be postponed until the committee begins its work.

“In addition, such funds illegally collected by the Commissioner General are at risk of theft as they cannot be secured by lawful deposit in any of the existing funds, including the Consolidation Fund,” he says.

On March 19, President Ruto assented to the Affordable Housing Bill 2023, paving the way for the reintroduction of the controversial housing levy deductions.

The new legislation also includes workers in the informal sector to ensure that the rules are in line with the Supreme Court ruling that declared them unconstitutional last year.