Despite the High Court and Court of Appeal previously ruling that the 1.5% mandatory deductions lacked a proper legal framework, reports indicate that collections have continued for the January 2026 payroll cycle.
This situation has set the stage for a constitutional showdown, with legal experts warning that the executive's actions threaten the independence of the Judiciary and the rule of law.
The controversy centers on the government’s insistence that the "Broad-Based Government" mandate requires the immediate completion of affordable housing projects to stimulate economic growth and job creation.
State officials have publicly labeled the restrictive court orders as "judicial sabotage," arguing that the projects are essential for providing dignified housing to millions.
However, the LSK maintains that any collection of taxes without a valid legislative basis is a form of "executive impunity" that undermines the democratic fabric of the nation.
Strategically, the Law Society of Kenya has initiated contempt of court proceedings against senior government officials and the Kenya Revenue Authority’s leadership.
The LSK President, Faith Odhiambo, has emphasized that constitutional compliance is not optional and that state officers may be held personally liable for the recovery of billions in unauthorized deductions.
These legal maneuvers aim to protect taxpayers from what has been described as an "illegal tax regime" that disproportionately burdens formal sector employees.
Economically, the defiance has caused widespread confusion within the private sector as human resource departments struggle with conflicting directives.
Many businesses are caught between the risk of penalties from the revenue authority and legal threats from employees demanding their full salaries in accordance with the court’s decision.
The Federation of Kenya Employers has called for an urgent official clarification to resolve the administrative stalemate and protect enterprises from the fallout of this high-stakes political tug-of-war.
Ultimately, the resolution of this crisis rests with a five-judge bench of the Court of Appeal, which is scheduled to hear consolidated petitions in late January 2026.
The outcome will be a decisive litmus test for the administration's respect for judicial authority during the second half of its term and will determine the future of the multi-billion shilling housing fund.
Until a final verdict is delivered, the tension between executive will and judicial restraint continues to dominate the national discourse, leaving the country’s financial landscape in a state of uncertainty.
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