A 3-judge bench sent shockwaves through Kenya’s fiscal landscape, striking down the contentious Housing Levy introduced in the Finance Act 2023.
The amendment to Section 84 of the Finance Act, altering the Employment Act to implement the levy, was found to be in violation of the constitution.
One of the core arguments against the levy was its lack of a comprehensive legal framework, rendering it irrational and against the principles of taxation.
The court ruled that the levy, as outlined in the Finance Act 2023, was discriminatory and unjust, creating disparity between the formal and informal sectors, thereby breaching principles of equality and equity enshrined in the constitution.
The projected collections from this levy were ambitious, aiming for significant financial inflows into government coffers:- 2023/24: Kes 63.2 billion- 2024/25: Kes 70.0 billion- 2025/26: Kes 78.0 billion.
However, with the recent court ruling, the government has been barred from collecting this levy. This decision not only has immediate fiscal implications but also sparks conversations about the legislative process and the importance of aligning laws with constitutional principles.
This verdict undoubtedly marks a critical moment in Kenya’s fiscal and legal landscape, raising pertinent questions about the drafting and implementation of laws and their adherence to constitutional principles.
As the dust settles, it remains to be seen how the government will respond and what steps will be taken to address this setback.
