CS Alice Wahome's stern warning on Affordable Housing Levy

Lands Cabinet Secretary Alice Wahome

Lands Cabinet Secretary Alice Wahome after officially opening the Regional Conference on Customary Tenure Rights in Eastern Africa in Nairobi on Tuesday. 

Photo credit: Wilfred Nyangaresi | Nation Media Group

Lands, Housing and Public Works Cabinet Secretary Alice Wahome has reiterated that all employers must continue to deduct the Affordable Housing Levy (AHL) from employees' gross salaries and remit it to the Kenya Revenue Authority (KRA) along with the employer's contribution.

In a statement, the CS stressed that failure to comply with the directive would result in fines.

"It is important to note that the employer's contribution to the Affordable Housing Levy is an allowable deduction under Section 15 of the Income Tax Act. An employer who fails to comply with the law is liable to pay a penalty of two per cent of the unpaid amount for each month that it remains unpaid," said CS Wahome.

This statement follows the recent decision by the High Court to suspend an earlier ruling that found the law unconstitutional.

The suspension will last until 10 January 2024 to allow the government to appeal the decision to the Court of Appeal.

The decision came after the Kenya Revenue Authority, the Attorney General and the Speaker of the National Assembly, Moses Wetang'ula, applied for a 45-day stay.

In a short ruling, Justice David Majanja upheld the court's power to grant a stay even after a decision has been declared unconstitutional.

Justices Majanja, Christine Meoli and Lawrence Mugambi said they did not have the final say in the matter.

They acknowledged the right of the respondents to appeal to higher courts and decided to grant a temporary stay pending the formal appeal to the Court of Appeal.

In an earlier ruling, the court had declared the housing levy unconstitutional, dealing a setback to President William Ruto's housing programme on grounds of discrimination and inequality.

The judges ruled that Section 84 of the Finance Act, which amends the Employment Act to introduce the Housing Levy, violates the principles of taxation in distinguishing between the formal and informal sectors, thereby creating unequal and inequitable principles.

The court added that the enactment of laws must be supported by a rational explanation, but in the case of the housing levy, the government failed to provide an explanation for the imposition of the levy or a legal framework to anchor the fees.

All employees, whether permanent and pensionable or on a contract basis, will start contributing to the Affordable Housing Fund from July 2023, when the legislation comes into force.

"An order is made restraining the respondent from collecting or charging or otherwise levying the Affordable Housing Act based on section 84 of the Finance Act and all prayers in the consolidated petition not specifically granted," said Justice Majanja, who read the judgment.

At the same time, the court said the Finance Act, 2023 was a money bill and the argument that the assent of both the Speakers of the National Assembly and the Senate was required before the law could be enacted did not stand.

Although the judges found that there were anomalies in the passage of some sections of the Finance Bill, they were not serious enough to invalidate the law.

The judges upheld the 16% VAT on insurance premiums, the digital asset tax and the betting tax, saying they were constitutional and within Parliament's mandate.

Justices Majanja, Meoli and Mugambi said it was wrong to argue that the amendment of Section 2 of the Finance Act to the Income Tax Act, which imposes taxes on entertainment, interfered with the function of county governments.