Premium

Workers' brief joy after housing tax ruling

Judges, from left, Christine Meoli, David Majanja and Lawrence Mugambi. [Collins Kweyu, Standard]

Workers are a happy lot, albeit temporarily after the court declared the housing levy an illegality.

The tax, many quarters said was partly to blame for the skyrocketing of the cost of living, had raided their pay slips and the relief was registered by their representatives.

Teachers’ representatives lauded the move saying it was a matter of time before the courts saw it for what it is.

“Today’s ruling has vindicated workers organisations, which stood in unison against the Housing Levy. The court has met the genuine aspirations of Kenyans on this unpopular section of the law. We hope that the government will obey the popular, cease these levies immediately and not resort to time wasting tactics like filing an appeal,” said Kenya Union for Post-Primary Teachers (Kuppet) Sceretary General Akelo Misori. 

It was, however, a pensive session in the court room as the litigants awaited the decision. The clock ticked, two hours to be precise, for the court to hand employees much-needed relief by declaring the controversial levy unconstitutional.

But the relief was short-lived as the same court re-convened and issued orders suspending the ruling until January 10 next year.

Earlier inside the courtroom, other than the chiming clock hung on the witness stand, the court was dead silent as Justices David Majanja, Christine Meoli, and Lawrence Mugambi read through their judgement that either drew approval or dissatisfaction from a battery of lawyers.

When the three judges declared the housing levy as unconstitutional, Azimio la Umoja One Kenya Coalition Party lawyer Ochieng Oginga smiled, nodded, and turned to lawyer Dudley Ochiel as if seeking an affirmation of what he had just heard.

Public participation

Initially, he held his forehead and bit his ball pen tip when the court appeared to lean on the government side by declaring that the National Assembly had conducted adequate public participation while enacting the Finance Act 2023.

On the other side, National Assembly lawyer George Murugara’s face lit when the court declared National Assembly speaker Moses Wetang’ula was not required to seek a consensus from his Senate counterpart Amason Kingi as the Act was a money bill.

However, Murugara’s face was an open book of disappointment when the court turned the tables by finding that the levy was unconstitutional.

The verdict sparked a plethora of applications by the Attorney General, National Assembly, and Kenya Revenue Authority (KRA) who sought a suspension of parts of the judgment.

Justices Majanja, Meoli, and Mugambi found the law to be vague, discriminatory, and irrational.

According to the judges, the Kenya Kwanza regime could not explain the rationale behind the levy, and how it only targeted those who are employed. “In the absence of rational explanation in the manner in which the housing levy was enacted, we can only conclude that the respondent went for the easy part of taxing employees in formal employment,” they observed.

The trio were of the view that the employed were a low-hanging fruit that was within reach by the Kenya Kwanza regime, and with little resistance. Further, the court found that it was illegal for the Lands Cabinet Secretary to appoint KRA as a collection agent. According to the judges, KRA is mandated to collect taxes and levies that are set out in its Act, and the housing levy is not part of the taxes that KRA is allowed to collect.

The Law Society of Kenya (LSK) fronted the battle to declare Section 84 of the Finance Act 2023, vague and unconstitutional.

LSK’s lawyers Noel Ngoloma and Eric Theuri argued that although Kenyans need to pay taxes, the Kenya Kwanza administration illegally enacted the housing levy by bending legislation procedures.

They stated that the levy was a ‘pye-dog’ of an idea as no Kenyan would tell whether it was a tax, a voluntary contribution or a fund.

According to LSK, the government ought to have dropped the idea to finance affordable

“There exists no rationale whatsoever as to why the government through the first respondent would force its citizens to contribute to a mandatory scheme in a country where a majority of its citizens are already grappling with harsh economic times due to the existence of multiple layers of taxes,” argued LSK.

According to the society, the government is also unclear on how Kenyans contributing to finance the houses will benefit from the same.

LSK insisted that taxes ought to be used for the benefit of the payer and should be universal for those in employment and those who are unemployed.

Mandatory provision

“The said mandatory provision is discriminatory in violation of Article 27 of the Constitution against persons employed in the formal sector as they will be required to make mandatory contributions for the benefit of those in the informal sub sector. This is by no means a way of administering a tax as there is no corresponding duty nor responsibility on persons in the informal sub-sector to make mandatory contributions to this housing fund,” said Ngoloma.

The LSK lawyers argued that it is discriminatory to burden employers and employees who are already grappling with over-taxation and a tough economy.

The lawyers stated that it is also unfair for persons who have homes to be forced to finance a project that they will not benefit or qualify for or are not interested in.

“Further, the impugned law is uncertain as to the beneficiaries of the said scheme which goes against the general principle of taxation that requires the language of a tax law to be clear especially when it is penal in nature. In this case, it is unclear what is required of employed persons who already own homes as the impugned legislation is clearly not their target,” argued Theuri.

Judges also declared amendments to the Kenya Roads Board Act, Unclaimed Asset Act, and Statutory Instrument Act, to be unconstitutional.

The judgment was not all doom and gloom for the government.

The court allowed taxing insurance compensations and upheld the requirement for alcohol products manufacturers and betting firms to remit excise duty within 24 hours.

At the same time, judges were unanimous that it is within the law for the government to demand taxes on those working and earning a living from digital platforms.

They also observed that the National Assembly had conducted adequate public participation

After the judgment, Azimio, Law Society of Kenya, and other petitioners urged the court to order the government to refund the money already collected for affordable housing.

LSK President Eric Theuri said that it was clear that the levy was not sanctioned in any law and was being illegally collected by KRA.

On the other hand, lawyer Oginga stated that the court should not suspend its verdict as it would amount to extending an illegality. “A negative order is not capable of being stayed. I urged the court to dismiss the application for stay,” argued Oginga.

Ochiel, for Kenya Human Rights Commission. argued that it would be unfair for KRA to demand a housing levy or punish those who will not pay while it is now clear that is unconstitutional.

The National Assembly, KRA and the Attorney General sought for 45 days suspension of the judgment.

“We have no doubt this court has jurisdiction to grant orders of stay pending appeal even after declaring a certain decision unconstitutional,” said Justice Majanja.

Majanja, Meoli and Mugambi said they did not have the final word on the issue in court.

“The respondents are also entitled to exercise the right of appeal to the court and even Supreme Court. We are inclined to grant the stay for a temporary period, pending the filing of the formal application at the Court of Appeal,” added Majanja.

Theuri said the court gave Kenyans with one hand and took away with the other. According to him, judges should not have stayed the implementation of their judgment until next year.

“We had a good judgment, especially on the housing levy.  However, on the ruling for stay, the court has allowed the government to have its way and continue collecting the illegal taxes. In a sense, the intention of the court was initially not to invalidate that section. What they have done is to give one hand and take away with the other,” noted the LSK president.

By Sammy Mose 3 days ago
Sports
Maiyo wins inaugural KAM golf tournament
Football
Nigeria's Super Eagles soar to AFCON final
Football
AFCON hosts Ivory Coast aim to overcome DR Congo in semifinals
Football
Nigeria sets sights on AFCON finals, confident against South Africa