The Kenyan government has faced enormous opposition in its recent effort to increase taxes on the manufacturing sector. In addition to causing confusion at the Ministry of Labor, the High Court ruling has also rendered the controversial Industrial Training Levy collection officially suspended.
Justice Lawrence Mugambi delivered the state’s fiscal plans with a hammer blow, issuing conservatory orders that obligate the National Industrial Training Authority (NITA) to stop the 0.03 percent deduction from the monthly gross wage bills of employers. This legal freeze was initiated by a high-stakes petition from the Federation of Kenya Employers (FKE), who took the levy to court, claiming that it was an unconstitutional and predatory financial burden.
The court’s decision marks a major win for the federation and a huge loss for the government, which had already counted on the funds for its plans for a more industrialized economy. The court also heard arguments that the levy was introduced without adequate public participation and amounted to double taxation for businesses already weakened by the exorbitant costs of production.
The immediate effect of the judicial ruling on the national budget is what makes it shocking. The government is in a hurry to fill the revenue gaps that have been widening, and this judicial ruling has cut off a major source of revenue right away. According to experts in law, this ruling could lead to an avalanche of similar suits against other taxes that have not undergone the rigorous scrutiny of the public and are also quite new.
For the time being, the manufacturing industry is in a somewhat uneasy victorious position. The suspension is still on hold until the petition is completely heard and determined, which has left the state’s industrial training agenda in total paralysis.
This ruling can be viewed as a very clear indication that the practice of imposing heavy taxes without legal restrictions is coming to an end. Employers all over the country are now looking forward to the next step the Attorney General’s office will take because the government is facing a difficult task trying to rescue the tax.
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