State in push to quash ruling on housing levy

 

The government yesterday said suspension of the 1.5 per cent housing levy and other taxes introduced by the Finance Act, 2023 would lead to a massive budgetary crisis and confusion in the country.

National Treasury Cabinet Secretary Njuguna Ndung’u and Attorney General Justin Muturi made the revelation before the Court of Appeal while seeking orders halting implementation of the High Court judgement that rendered the housing levy unconstitutional pending the determination of their appeal.

Ndung’u and Muturi told Justices Lydia Achode, John Mativo and Mwaniki Gachoka that if the existing orders which are expect to lapse by January 10 are not extended there will be serious crisis and a lacuna on how the government will collect taxes to finance major projects and pay salaries.

Court also heard that implementation of the judgement will further lead to several government officials and agencies including Kenya Revenue Authority and Ministry of Housing being held in contempt of court for failure to refund the 1.5 per cent housing levy amounting to billions of shillings they have since deducted from salaried workers.

While seeking for the stay orders, the AG and Treasury CS through lawyers Githu Muigai, Kiragu Kimani and Mahat Somane said there would be heavy implications should the judges decline the plea.

“Unless this court was to protect the Kenyan public, our appeal will be rendered nugatory. The consequences are unimaginable, legal constitutional crisis and the chaos that would follow are without precedent in the history of our country,” Githui stated.

Statutory instruments

But the petitioners, who included Busia Senator Okiya Omtatah, rebuffed the government’s argument, saying that continued implementation of the levies the court had ruled as null and void is a violation of the Constitution.

Yesterday, government lawyers urged the appellate judges to suspend the High Court judgement issued in November last year that declared some sections of the Act including the housing levy, Kenya Roads Board and unclaimed assets unconstitutional, null and void until their appeal is heard and determined, saying Kenyans will not suffer any prejudice if they continue paying for the taxes.

Kimani told the court that if the orders which are expected to expire on January 10 are not extended the same will halt the collection of over Sh73 billion taxes and put an end to several projects including the ongoing construction of 258,874 house units across the country.

“The 120,000 jobs created through the affordable housing project will again be put to an end. If you allow the order the levy will continue being collected and if the appeal fails then there can be a mechanism of rebursing the funds to the taxpayers affected. But you can not call the taxpayers to rebate the taxes,” State Counsel Kimani told the judges.

He also told the court that if the implementation of the High Court judgement takes effect, their appeal will be rendered nugatory and academic exercise.

“The absence of a stay and if the implementation of the judgement takes effect there will be no arguable appeal and the case before this court will only be a piece of paper. If you do not grant a stay there will massive confusion in the country,” Kimani stated.

In his submissions, Somane informed the judges that the 45 suspension order given by the high Court was proper and was in accordance with law.

Somane asked the Court of Appeal to suspend the High Court decision declaring the levy unconstitutional to give the legislature to remedy the law and the appeal to be heard.

National Assembly Speaker Moses Wetang’ula on his side supported Ndung’u Muturi’s request for grant of stay orders to allow Parliament remedy the situation on housing levy which began in December before MPs went for recess.

Unnecessary burden

Wetang’ula, through lawyer George Murugara, told the judges that his appeal is arguable and vigorous and he intend to prove that the High Court erred when it declared sections 76 and 78 of Kenya roads board, the unclaimed assets act, the statutory instruments act and Section 84 of the Finance Act 2023 in which the housing levy is based unconstitutional. He said Section 88 and 89 of statutory instruments all touch on the three arms of government.

“Some of the statutory instruments touched on government entities with revenue collection including the tribunals and if these are not kept alive some institutions may come to an end or die and therefore there will be a lacuna in the running of government to the detriment of its citizens,” Murugura said.

They include National Technical Referral Hospital Regulations, Bomet University Regulations, Kenya Technical Trades College Regulations, Kisumu National Polytechnic Regulations, Eldoret National Polytechnic Regulations, the Kenya Institute of Mass Communication.

Kenya Revenue Authority, through lawyer Gaya Ochieng urged the court to impose stay orders, saying it risks being jailed for contempt if an application on housing levy refund is made.

“If the orders are not granted KRA and Ministry of Housing will be cited for contempt of court if any application for refund is made. It is in good order and the public interest that order of stay be granted at this stage, “ Ochieng sought.

The court heard that there is a mechanism for KRA and Ministry of Housing to refund the taxes so far collected.

“These are funds that the persons who paid can be identified, hence the refund process can be revoked depending on how the court will rule. On the other hand, can the government recover the answer is no. Why? These are general members of the public counting to millions how you will invoke the recovery process for the said amounts and period,” Ochieng said.

KRA asked the appellate court to allow Kenyans to continue paying for housing levy pending the hearing and determination of the appeal to avoid unnecessary burden on taxpayers by backdating the taxes if the appeal is successful.

“The issue of public interest is well served if Kenyans are allowed to continue paying the little 1.5 percent housing levy, “ Ochieng stated.

However Omtatah, UK-based Kenyan activist Eliud Matindi, Katiba Institute, LSK and Azimio la Umoja coalition vehemently opposed the grant of orders suspending the High court judgement.

Assuming jurisdiction

While seeking to vacate the existing orders that allowed Kenyans to continue paying the high taxes imposed on them by President William Ruto’s administration through the Finance Act 2023, Senator argued that the High Court judges erred in law and in fact by assuming jurisdiction which they did not have while suspending their decision.

They argue that when High Court Justices David Majanja, Christine Meoli and Lawrence Mugambi ruled that the housing levy and some other sections of the Finance Act to be unconstitutional, immediately, the law in issue became null and void and ceased to exist and it could not be brought back into existence by any machinations or craft of the court.

According to Omtatah, Article 2(4) of the Constitution, was an absolute bar, which prohibits the court from allowing the continued violation of the Constitution through its order suspending the effectiveness of its own final decision.

“Unlike jurisdiction like South Africa and Canada where people have tried to import the jurisprudence into Kenya municipality. Our constitution does not grant power to any court to suspend its own findings of unconstitutionality. Article 2(4) of the constitution is very clear that anything that is unconstitutional is null and void,” Omtatah stated. “Where would the court be standing if the court tries to reinstate such an unconstitutional law?” Omtatah posed.

He added that the court is not a legislature as it can not bring a law to live.

“Upon pronouncement that a law is unconstitutional that court has no capacity under the Constitution to go ahead and suspend that finding, “Omtatah told the judges.

Review afresh

He, however, urged the judges to review afresh the orders and find that the High Court had no powers to overturn its own judgement on constitutionality.

Omtatah in his submissions has argued that by tabling the Affordable Housing Bill 2023, the state inadvertently conceded that there was an underlying problem with the Housing Levy per Finance Act 2023.

He wondered why the government has appealed the decision of the high court and they have since started implementing by gazettement and the bill being tabled in parliament in December.

“If you look at the way this case is going largely it’s about the question of affordable housing levy. Having published the Housing levy 2023, the Parliament, the AG and the CS Treasury have already conceded and implemented the decision of the court. How can they then appeal? And therefore they do not have an arguable appeal,” Omtatah told the judges.

The senator dismissed the argument by the AG that the government will lose billions of shilling and several employees hired under the affordable housing project will be rendered jobless saying that the government went ahead to engage contractors in an illegal project.

“The issue of contracts is neither here nor there because if you look at the appropriation act and the budget for 2023 to 2024 there is no provision in the budget for affordable housing to be financed. The Public Procurement and Disposal Act is very clear that you can not procure where you do not have money,” Omtatah informed the judges.

“So when the government says that it entered into contracts, what kind of contracts were this, what budget were they based on? For sure there was no budget,” he added.

In the case, a total of five appeals have been filed challenging the High Court judgement that declared some section of Finance Act 2023 unconstitutional.

Justices Achode, Mativo and Mwaniki are expected to issue a substantive ruling on the two applications on January 26.

ByNancy Gitonga