In a setback for the Kenyan government, the Court of Appeal has rejected its bid to dismiss an appeals case challenging a contentious housing tax.

The High Court had previously ruled in November that the 1.5% monthly levy unfairly targeted formal sector workers, prompting a halt in payments.

On Friday, the Court of Appeal extended the suspension of the tax, allowing citizens to refrain from paying until the case concludes. Despite the government's push to resume tax collection during this period, the court's decision stands. The government is expected to file an appeal.

Last July, the government initiated the deduction of 1.5% from gross salaries of both locals and foreigners to fund the construction of affordable housing for low-income earners. This move triggered opposition and widespread dissatisfaction among Kenyans burdened by President William Ruto's introduction of various taxes.

The government's argument that suspending the levy would jeopardize jobs under the housing program and breach existing contracts was not accepted by the court. While the final decision is pending, the ruling brings relief to many Kenyans.

This development follows last week's approval by the appeals court of a controversial healthcare insurance levy, requiring individuals to contribute 2.75% of their monthly salaries to a social healthcare program.

The housing levy case is part of a series of petitions causing tensions between the judiciary and executive branches. President Ruto has accused allegedly corrupt judges of collaborating with the opposition to undermine national development projects.