The High Court has ruled that the housing levy imposed under the Finance Act 2023 is unconstitutional.
A three-judge bench comprising Justices David Majanja, Christine Meoli and Larwrence Mugambi delivered the ruling to settle the four months court battle pitting the government and petitioners.
Justice Majanja on his part tackled the issue on whether the Housing Levy imposed by the bill was a tax and whether it was a function of the county government as presented by the petitions.
In his ruling, the High Court judge stated that a levy is a form of tax by definition, citing the Blacks Law Dictionary.
Further, Majanja dismissed the argument that housing levy interfered with functions of the county government.
According to him, the housing function is shared function and the levy imposed in the Act was meant to be an enabler of the national housing drive.
However, the Judge raised concerns over possible lack of legal framework to govern the housing levy fund.
“Our understanding of 206(1) is that money earmarked and collected for a purpose must be paid over into a public fund established for that purpose by legislation,” he stated.
In addition, Majanja ruled that the law does not envisage a scenario where the Kenya Revenue Authority (KRA) could collect funds from such a levy.
According to him, Treasury Cabinet Secretary Njuguna Ndungu should have amended the law to authorize KRA to conduct the task of collecting funds under the levy.
In addition, Majanja ruled that the housing levy is discriminatory and unfair.
He noted that the levy targeted persons in the formal sector while leaving out those in the informal sector.
However, the government quickly requested for a 45-day stay of the ruling to regularize the Housing Levy in fear of extension of the charges declared as unconstitutional.
Seven petitions had been filed to challenge the Act which was passed in June and later assented by President William Ruto.
Judges rule on whether Senate Speaker should have been involved
On the question on whether the Finance Bill needed the concurrence of the Speaker of the Senate, Justice Lawrence Mugambi ruled that the bill did not warrant such concurrence.
According to Justice Mugambi, the Finance Bill was a money bill and hence eliminating the necessity of concurrence between the two houses.
“In view of the foregoing, we are satisfied that, applying the peel and substance test, the Finance Bill 2023 is a money bill; however, it contains matters that are extraneous to a money bill and are unconstitutional,” the High Court Judge ruled.
On her part, Justice Meoli ruled that the National Assembly conducted a reasonable public participation exercise in the period preceding the passage of the bill.
Meoli ruled that the correspondents in the case had adduced evidence showing that the National Assembly published notices inviting views from the public regarding the Bill.
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She affirmed that the public participation conducted was reasonable more so considering the urgent nature of the bill she noted was ‘time bound”.
“We are satisfied that the public participation conducted by the National Assembly was sufficient,” Judge Chirstine Meoli ruled.
Unending twists in Finance Act
Among the petitions was one by Busia Senator and public interest litigator Okiyah Omtahtah.
Consequently, Justice Mugure Thande issued conservatory orders to suspend its implementation temporarily and asked Chief Justice Martha Koome to form a three-judge bench to handle the cases.
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However, the Court of Appeal later lifted the conservatory orders barring implementation of the measures in the Act, a decision that was later reaffirmed at the Supreme Court.
The Finance Act of 2023 had sparked jitters in the country owing to some tax measures deemed in some quarters as punitive.
The Act proposed, among others, an increment of the VAT on petroleum products to 16% up from the previous 8%.
In addition, the Act introduced a housing levy that would see Kenyans pay 1.5% of their salaries.
