The High Court has granted stay orders on the implementation of the judgement that rendered the Housing Levy unconstitutional.
A three-judge bench consisting of Justice Lawrence Mugambi, Justice Christine Meoli, and Justice David Majanja made the ruling on Tuesday hours after declaring the levy unconstitutional, null and void.
"An order of stay be is hereby issued staying the effect of this judgement issued today November 28, 2023, pending the filing of a formal application for the stay of conservatory orders in the Court of Appeal," Judge Majanja ruled.
"This order of stay shall remain in force until January 10, 2024."
The State through its lawyer George Murugara had asked the court to stay the orders for 45 days.
This means that Kenyans will continue remitting 1.5 per cent of their earnings to the fund with employers required to match an equal amount.
While applying for the stay orders, Murugara, said that will enable the government to make necessary adjustments and contemplate whether they would appeal the decision.
"We are aggrieved as regards Section 84 of the Finance Act in which the housing levy has been declared unconstitutional and declaratory orders have been made to stop the respondents from collecting the levies," he said as he applied for the conservatory orders.
"In those 45 days, I urge you to suspend the oppression of those particular findings in the judgement and any decree that may flow therefrom pending the filing of a formal application."
He went on to list the justifications of the prayer, saying they have to make the necessary adjustments to the government's procedure of taxation.
He said there may be irreversible loss if, on appeal, the section in question is upheld.
He noted that Kenyans will not be prejudiced if the orders he is seeking are granted.
"This is because as the Court of Appeal observed in its ruling, a party aggrieved by payment to the government of these levies can actually get redates for overpaid taxes and levies. So those applications can be made and monies possibly can be reversed," Murugara added.
On his part, Kenya Revenue Authority (KRA)'s lawyer Ochieng Gaya also sought a stay of the declarations in regard to the housing fund.
He stated that the court's pronouncement placed them in "a very awkward situation" as the KRA not only collects the housing fund but there are also other agencies.
He added that the judgement would result in suits against the tax agency for illegally collected funds.
"We need a stay order to prevent refund claims which shall be made," he said, noting that it can only refund taxes under the statute.
With the levy having been declared to be outside the statute, KRA will be subjected to a damages suit.
"In that regard, we will be seeking that we are allowed stay pending our formal instruction from the client on the best way forward," Gaya said.
The same was sought by the Attorney General.
The prayers were however opposed by the petitioners saying a declaration of unconstitutionality could not benefit from a stay order.
"Also on our side as petitioners, we would want to appeal for an order of this court for reimbursement for those who have already paid the housing levy under Section 84. Let the money be paid back," the court heard.
Azimio lawyer Ochieng' Oginga said it would be contrary to Article 23(3)(d) for the court to issue an order suspending its judgement on the housing levy being unconstitutional.
The Article is on the authority of courts to uphold and enforce the Bill of Rights.
"To stay the declarations of invalidity would be a kin to this court sanctioning a continued violation of the constitution," Oginga added.
Lawyer Alex Cherongis also opposed the prayers arguing that the respondents were looking to extend illegalities.
The petitioners recommended that the respondents seek an appeal, saying the application was in a negative order.
President of the Law Society of Kenya (LSK) Eric Theuri asked the court "not to entertain the application", adding that employers, who have been paying the levy, know of the orders.
"As of this moment, all the employers know that that tax should not be levied and so therefore, they will not be able to deduct it and submit it to KRA. There will be no difficulty whatsoever that would be occasioned by that decision," Theuri said.
The LSK boss refuted the claims of irreversible consequences, saying the same ought to have been placed before the court, through a formal application.
"The application that has been made before you is highly speculative. It is based on a speculation that there might be contracts that have been signed and that is not a good ground for a grant of stay," he said.
Theuri warned that if the court granted the orders sought, there would be continued collection of the taxes despite the court's declarations.
He also disputed that there would be any contempt suits against the respondents, as the housing levy is not a fund that is automatically collected by the government.
He also urged the court to make an order for a refund of the taxes that have been paid and collected.