Court issue orders against the enforcement of Ruto’s new social housing and healthcare taxes
Kenyan High Court judges have recently issued injunctions preventing the implementation of fresh taxes on social housing and healthcare.
This development is a significant setback for President William Ruto’s efforts to advance his bottom-up economic agenda.
The court rulings, issued within a few days of each other, have temporarily suspended the collection of a 1.5 percent housing levy deducted from employees’ gross monthly salaries, which is also matched by employers.
Additionally, the judges halted the imposition of another 2.57 percent tax for social healthcare insurance.
The government has appealed the decision regarding the housing levy, and a hearing for the challenge against the social healthcare tax is scheduled for February next year.
The two taxes have garnered dissatisfaction among salaried workers, anticipating a substantial reduction in their take-home pay once basic statutory deductions, loan withholdings, and other obligations are factored in.
Despite this unpopularity, President Ruto faces the challenge of fulfilling populist election promises while simultaneously implementing World Bank and IMF-approved structural adjustment programs, conditions tied to loans.
Under mounting pressure, President Ruto is resolute in preserving these taxes.
Following the judges’ decision to temporarily halt the collection of the housing levy, President Ruto expressed determination to utilize the 45-day window provided by the court. During this period, the government aims to regularize the tax law through parliamentary procedures.
President Ruto’s confidence in preserving the taxes is likely buoyed by the current power dynamics in Parliament, which favor his Kenya Kwanza coalition due to controversial shifts in loyalty by several opposition members.
The opposition leader, Raila Odinga, previously leading protests against the government, has hinted at the possibility of resuming mass action in the future. This comes after the government refused to incorporate commitments to lower the cost of living in the bipartisan talks committee’s reform recommendations.
However, within his own Azimio la Umoja One Kenya Alliance, there is apparent division as key leaders within the opposition coalition have taken conflicting positions on the recent report.
As a result, the courts emerge as a significant obstacle to President Ruto’s policy decisions, at least for the time being. Notably, President Ruto faced a notable legal setback in July when judges declared the position of chief administrative secretary (CAS) illegal, preventing 51 appointees from assuming office.
During a similar timeframe, a court took the step of suspending the implementation of the new Finance Act, resulting in the freezing of billions of shillings in tax collections per day and disrupting the administration’s spending plans. Citizen litigation has consistently posed challenges for the current administration, reminiscent of the hurdles faced by President Uhuru Kenyatta’s government. Notably, courts thwarted attempts to change the Constitution through the government-backed Building Bridges Initiative reform proposals.
President Kenyatta’s relationship with the Judiciary soured during his second term, particularly after the Supreme Court’s landmark decision to nullify his re-election victory in 2017, prompting a repeat election. Critics accused him of retaliating by constraining the Judiciary’s budget and delaying the appointment of 41 judges nominated by the Judicial Service Commission.
In contrast, President Ruto has demonstrated a willingness to mend relations. On his first day in office, he appointed six judges overlooked by Kenyatta and directed increased funding to the Judiciary. Despite this, the opposition, without providing evidence, alleged that the president’s decisions were part of a scheme to control public accountability institutions after defections granted him control of Parliament.
