President Ruto, Parliament on a Collision Path Over Housing Levy Deductions

President William Ruto and Parliament are on a collision course over the issue of housing tax deductions that were deemed discriminatory by the court.

MPs have taken action by proposing a solution to have the Kenya Kwanza government repay the funds collected between August and November. Senate Minority Leader, Stewart Madzayo, has urged the appropriate committees in both the Senate and the National Assembly to initiate the necessary steps to ensure that individuals who had deductions made from their income receive their refunds from the Kenya Revenue Authority (KRA). This collaborative effort between the Senate committees, such as Roads, Transport and Housing, as well as Finance and Budget, and their counterparts in the National Assembly aims to guarantee that Kenyan citizens are duly reimbursed.

Senator Madzayo has brought attention to the discrepancies in the estimated revenue and has raised concerns about the unfairness of the tax. According to him, the projected amount for the present fiscal year is Sh 63.2 billion, Sh 70 billion for the 24/25 fiscal year, and Sh 78 billion for 2025/2026. Additionally, Senator Madzayo has called for a reevaluation of the Finance Act, 2023, to bring it in line with the Constitution, following the recent ruling by the High Court on November 28, which deemed the tax discriminatory and a violation of principles of equality.

To comply with the court ruling, Majority Leader Kimani Ichung’wah has introduced the Affordable Housing Bill, 2023. However, since Parliament is in recess until February, National Assembly Speaker Moses Wetang’ula will have to convene a special session to fast-track the passage of the law and meet the deadline of January 10, 2024. A group of three judges has ruled that the levy goes against taxation principles and unfairly targets those who earn informal incomes.

The judges stressed the importance of a tax law being grounded in a valid government objective to maintain the integrity of the legal system. In this particular instance, they determined that the government had not offered a rationale for the levy or set up a legal structure to validate it. Furthermore, the government enforced Housing Levy deductions from July 1, 2023, in a retrospective manner and appointed the Kenya Revenue Authority (KRA) as the entity responsible for collecting these deductions.