The prominent business group told its members in a statement that the Court of Appeal ruled earlier in the day that the 1.5% levy on salaries should stop immediately because it was introduced without a proper legal framework. The court rejected the government’s plea to keep collecting the money pending its appeal.
“In light of the court order, we advise our members not to deduct the levy unless the Court of Appeal rules otherwise after the hearing of the substantive appeal,” the statement said.
The employers’ group has maintained that forcing members to remit the levy before its legality is fully determined violates their rights. The group’s CEO, Jacqueline Mugo, welcomed Friday’s ruling as a win for public interest.
“Our commitment is to keep you informed promptly of any changes or updates,” Mugo said in the statement to members. “We encourage you to stay informed on this issue and advise your employees accordingly.”
In a unanimous ruling by Justices Achode, Mativo and Gachoka, the appellate court declined to suspend last November’s High Court judgement which had declared sections 76, 77, 78, 84, 87, 88 and 89 of the Finance Act 2023 as unconstitutional. The sections were the legal basis for the housing levy which was meant to fund the government’s ambitious affordable housing programme.
“Cognizant of the fact that an applicant needs only to demonstrate one arguable ground and not a multiplicity of them, we have no hesitation in finding that all the applicants have satisfied us that they have an arguable appeal,” the judges ruled regarding the government’s application for stay orders pending appeal.
However, on whether the appeal would be rendered nugatory, the court found that the government failed to demonstrate irreversible harm. “The applicants left it to the court to fill the gaps. We cannot do so without appearing to descend into the arena of the dispute. We decline the invitation to do so,” the ruling stated.
The ruling means that the legal basis for the 1.5% housing levy on salaries now stands invalidated. The government plans to table a standalone Affordable Housing Bill to revive the levy, but its future remains uncertain.
