Why the Supreme Court rejected the suspension of the housing tax

The Supreme Court has refused to temporarily suspend sections of the Affordable Housing Act, including the housing levy, on the grounds that the public interest supports keeping the law in force pending the outcome of the applications.

A three-judge panel said that laws passed by Parliament are presumed to be constitutional and the court cannot stop them unless it is proven that there is a risk of violation.

Six petitions were filed against various provisions of the Affordable Housing Act 2023 and consolidated before Chief Justice Martha Koome appointed Justices Olga Sewe, John Chigiti and Josephine Mong’are to decide the cases.

“We have therefore concluded that the petitioners have failed to establish that the impugned provisions pose a danger to life and limb or that they threaten the Bill of Rights to justify the orders sought. We are not persuaded that the failure to grant the orders sought will render the petition ineffective,” the judges said.

The judges said they had no doubt that the affordable housing levy had aroused great public interest, although there were differing arguments as to its constitutionality.

The complainants, including Magare Gikenyi, had argued that the money was vulnerable to theft and embezzlement because there was no board of directors to manage the fund and no clarity on who was collecting the money. This was a violation of Article 10(2) of the Constitution, which sets out the principles of national values ​​and good governance, integrity, transparency and accountability.

They further pointed out that the role of the Commissioner-General of the Kenya Revenue Authority was limited to the affairs of the Authority and not to the collection of taxes.

The court was also informed that the housing levy was set at 1.5 percent without any study on how the fund would work, but no money should be collected from the public without an expenditure item and the establishment of a fully functional fund as required by law.

The government defended the law on the grounds that every parliamentary law is presumed to be constitutional.

Parliament also explained that the Act sets out the legal framework for the collection of the levy and that the collection of levies is not unusual in Kenya. Examples of such initiatives were cited as the Road Maintenance Levy and the Petroleum Levy.

President William Ruto signed the Affordable Housing Bill 2023 into law in March 2024, paving the way for the resumption of the levy deduction, which had previously been stopped by the court. Employees will be deducted 1.5 percent of their gross monthly salary, which will be matched by the employer.

Under the new law, Kenyans in the informal sector and others without salaries will also have to pay 1.5 percent of their gross monthly income to finance President Ruto’s preferred housing project.

One of the applicants, Dr Gikenyi, wants the court to find that there was insufficient public participation before the passage of the Act and that sections 3 and 4 of the Act are unconstitutional as they pose a threat to social and economic rights and are inconsistent with the Constitution.

The petitioners also demand the repeal of the entire Government Financial Management (Kenya Slum Upgrading, Low-Cost Housing and Infrastructure Trust Fund) Ordinance and that the government be required to repay the amounts already collected from Kenyans.

“Articles 10, 21(3) and 201 require that tax measures must be socially just, reasonable, proportionate and progressive and that the tax burden must not be disproportionately shifted onto the poor and marginalised,” explained one of the petitioners.

The applicants ask the court to compel the government to conduct an assessment of the human rights impacts of the proposed tax measures, to fund any government programs, and to impose a permanent injunction prohibiting the government from collecting any taxes at all without said assessment.

The Cabinet Secretaries responsible for lands and the files of the State Treasury, the Attorney General and the National Assembly rejected the case.

The judges noted that the applicants were asking the court to stay the application of certain sections of the Act to an application without hearing the application on its merits.

They said that laws passed by Parliament were generally presumed to be constitutional until proven otherwise and that no such drastic decree could be issued on request.

The judges stated that the hearing of this case would be given priority.