The Court of Appeal on Friday, January 26, barred the government from collecting housing levy deductions until a case challenging its constitutionality is heard and determined.
The government had moved to the appellate court after the High Court in November 2023 declared the controversial legislation as constitutionality, null and void.
However, the court allowed the government to continue collecting the deductions for 45 days, which lapsed on January 10, 2024.
Later the Kenya Revenue Authority, the Attorney General and Speaker of the National Assembly moved to the High Court and successfully obtained an order to allow the deductions until the Court of Appeal ruled conclusively on the matter.
A three-judge bench comprising of Justices Lydia Achode, John Mativo, and Mwaniki Gachoka ruled that public interest dictated that the deductions are suspended awaiting determination of their legality.
They added that allowing deductions per the state’s request would create a situation where it would be nearly impossible to reverse them if the law was untimely found illegal.
"The question that begs an answer is whether in the circumstances of this case it would be in public interest to grant a stay whose effect is to allow a statute that has been found to be constitutionally infirm to continue being in the law books pending the hearing of an appeal. We do not think so. This is because should the Court hearing the appeal affirm the constitutional invalidity of the impugned laws, then all actions that will have been undertaken under the impugned sections of the law during the intervening period will be legally frail."
"In our view, public interest lies in awaiting the determination of the appeal. This is because if the stay sought is granted at this stage, should the appellate Court affirm the impugned decision, then some far-reaching decisions that will have been undertaken pursuant to the impugned laws may not be reversible," the ruling read in part.
The ruling effectively means that from Friday, January 25, the government has no legal basis to make the housing levy deductions where employees contribute 1.5% of their gross salary and employers required to match a similar amount for each employee.
However, the current ruling does not mean there will be refunds for the deductions already made. The wording of the judgement suggests that such an order would be unlikely. The judges noted that allowing such deductions would most likely be impossible to reverse even if the court ultimately finds that the housing levy was unlawful.