The Law Society of Kenya (LSK) has taken legal action by moving to court to challenge the implementation of the Finance Act and prevent the government from collecting new taxes. The association has filed an urgent case before the Constitutional and Human Rights Court, seeking a declaration that the newly imposed taxes are unconstitutional.
LSK contends that this is not an appropriate time to increase taxes, considering the prevailing economic challenges that have pushed many Kenyans into financial distress. The lawyer's association also raises concerns that the new taxes will impose a heavy burden on Kenyan employers, at a time when unemployment rates are on the rise.
"THAT pending the hearing and determination of this Application inter partes, a Conservatory Order be and is hereby issued restraining the 2nd Respondent whether acting jointly or severally by themselves, their servants, agents, representatives or howsoever otherwise from the implementation, further implementation, administration, application and/or enforcement of Section 10 (2) (3) of the Income Tax Act as amended by Section 7 of the Finance Act, 2023," reads part of the affidavit filed by LSK.
Earlier on July 28, the Appeals Court had lifted the orders that halted the implementation of the Finance Act, allowing the government to proceed with its execution while the case, filed by Busia Senator Okiya Omtatah, remains pending for determination.
The Finance Act has faced opposition due to the introduction of various new taxes that will reduce employees' take-home pay, coming just months after the government increased statutory deductions like NHIF and NSSF.
One of the contentious new deductions is the 1.5 per cent Housing Levy, designed to support President William Ruto's affordable housing program.
"THAT pending the hearing and determination of this Petition inter partes, a Conservatory Order be and is hereby issued restraining the Respondents whether acting jointly or severally by themselves, their servants, agents, representatives or howsoever otherwise from the implementation, further implementation, administration, application and/or enforcement of Sections 31B and 31C of the Employment Act as introduced by Section 84 of the Finance Act, 2023 by collecting and/or demanding payment of the housing levy," stated LSK in their application.
President Ruto has asserted that the Finance Act was a necessary measure to address the country's debt burden and generate much-needed revenue to fund the government's ambitious development projects and create more job opportunities.
However, opposition groups have challenged the Act, advocating for alternative ways to fund the Ksh3.6 trillion budget. They have suggested debt restructuring as an option, instead of resorting to tax hikes.
In response, President Ruto has ruled out debt restructuring and opted to increase taxes, including levies on top earners and raising excise duty on imported furniture, airtime, and money transfers.