Kenya court strikes out key clauses of a finance law as economic woes deepen from rising public debt

NAIROBI, Kenya (AP) — The Kenyan High Court on Tuesday struck out key clauses of a contentious finance law that has been blamed for significantly raising taxes and the cost of living in East Africa’s largest economy.

High court judges David Majanja, Christine Meoli and Lawrence Mugambi said parts of the Finance Act 2023, including a mandatory housing levy, were unconstitutional and couldn’t be enforced.

“The levy against persons in formal employment to the exclusion of other nonformal income earners without justification is discriminatory, irrational, arbitrary and against the constitution,” according to the 160-page judgment.

The housing levy is a significant agenda of President William Ruto, who has pledged to construct 1 million homes by 2027 under his affordable housing program already underway in parts of the country.

Political analyst Herman Manyora said that the court ruling was a big blow to the government, “which has lost public support by pushing an unpopular legislation.”

The law, which was enacted earlier this year, also doubled value added tax on petroleum products to 16% up and raised taxes on personal income up to 40%.

It led to mass protests in the capital, Nairobi, and parts of western Kenya where the opposition enjoys big support.

The International Monetary Fund backed the law, which is part of the government’s efforts to increase revenue collection to pay for a ballooning foreign debt that now stands at $70 billion — some of which is due next year.

Last week, the Federation of Kenyan Employers said that the private job market had lost 70,000 jobs since October 2022, and attributed it to the finance act, which had led to a hostile business environment.

“Every day we receive notifications from employers on their intent to declare redundancy,” the federation said.