Supreme court overturned the court of appeal’s ruling, which had declared the Finance Act 2023 unconstitutional.
The judges concluded that the finance act of 2023 is constitutional, citing that the national assembly had conducted adequate public participation.
Following a two-day hearing, the court on September 11, 2024, said it will deliver its verdict on notice.
During the hearing, key issues raised included whether there had been adequate public participation and if concurrence between the National Assembly and the Senate was required for any amendments made by one House without the other’s involvement before a law could be enacted.
The supreme court granted conservatory orders, staying the implementation of the court of appeal's judgment that declared the finance act, 2023 unconstitutional. The court ruled that public interest tilted in favor of granting the conservatory orders.
The stay orders issued reinstated the operation of the act pending the hearing and determination of the substantive appeal, which will determine whether the act is indeed unconstitutional.
The court set the hearing on September 11 and 12, 2024.
The supreme court refused to set aside the court of appeal's decision that nullified the 2023 finance law.
The national assembly appealed to the supreme court, requesting a pause on the court of appeal's judgment. It argued that the decision is unworkable and would disrupt government operations if allowed to stand.
The court of appeal ruled that the 2023 finance law was unconstitutional because it didn't consider public opinions. Justices Kathurima M'Inoti, Agnes Murgor, and John Mutivo found that the law was flawed because new sections were added without seeking public input.
The court stated that parliament must explain why it accepts or rejects public suggestions, which it failed to do. Regarding the housing levy tax, the judges noted that the new Affordable Housing Act of 2024 had replaced the housing tax provisions from the 2023 Finance Act, so the issue was no longer relevant.
The court of appeal refused to extend a stay that had allowed the government to continue collecting a 1.5 percent levy to fund affordable housing despite a lower court having found the measure unconstitutional. The court said "the presumption of constitutional validity ... was extinguished the moment the trial court issued the declaration."
The court of appeal granted permission for the government to persist in collecting the housing levy while awaiting its final decision, scheduled for January 26, 2024.
This decision comes in response to the government's appeal to extend the housing levy deductions, as they are in the process of appealing the high court's ruling, which deemed certain sections of the finance act of 2023 unconstitutional.
The court found the Housing Levy illegal.
Judges Lawrence Mugambi, Christine Meoli and David Majanja ruled that introducing the levy was discriminatory since it imposed taxes on salaried Kenyans alone and excluded those working in the informal sector.
They declared that Sections 76 to 78 of the Finance Act amending Section 7 of the Roads Board Act, Section 87 amending Section 28 of the Unclaimed Assets Act, 88 and 89 are unconstitutional and void.
The bench also found that Section 84 of the Finance Act violated several constitutional articles. The judges, however, stayed their judgment until January 5, 2024.
The court postponed the judgment to November 28, 2023.
The bench said they will give their determination on November 24, 2023.
The three-judge bench set September 13 and 14 as the hearing date for the consolidated cases challenging finance act of 2023.
Chief Justice Martha Koome set up a three-judge bench, including Justices David Majanja, Christine Meori, and Lawrence Mugambi, to hear cases against the finance act of 2023.
The high court further suspended the implementation of the finance act of 2023.
The court said taxes must be based on law.
Judge Mugure Thande asked the Chief Justice, Martha Koome, to form a three-judge bench to preside over the suit.
The judge also consolidated our case with that of Okiya Omtatah, Petition No. E181 of 2023.
The high court extended orders that prevented the finance act of 2023 from being implemented.
The court will announce its decision on July 10, 2023, at 2 pm.
KHRC and six other petitioners filed a suit--Petition No. E228 of 2023--to block the implementation of the punitive Finance Act 2023.
The other petitioners are the Katiba Institute, the Institute for Social Accountability (TISA), Transparency International Kenya, the International Commission of Jurist – Kenya (ICJ Kenya), Siasa Place, and Tribeless Youth.
The finance bill, 2023, a subject of controversy, was passed by the national assembly on June 14, 2023, despite widespread public opposition and discontent.
The bill aimed to generate additional revenue through taxation; however, it faced strong opposition due to the already burdensome cost of living and the prevailing stagnant and limited income affecting Kenyans.
During the bill’s public participation, Kenyans vehemently rejected it, citing its imposition of punitive taxes as a primary concern.
Notably, the proposed increase in Value Added Tax (VAT) on fuel products from eight to 16 per cent and the introduction of a new three per cent housing levy drew significant criticism. You can find additional details on the imposed taxes in the Finance Bill, 2023, available in the key documents.
Despite widespread public resistance, President William Ruto, in a show of defiance, warned his affiliated MPs about potential consequences for those opposing the bill.
In the face of these threats, MPs passed the bill, forcing us to move to court.
On November 28, 2023, the high court delivered its verdict, offering a mixed outcome to the petitioners. The judgment accepted some of the petitioners' requests while dismissing others. The key findings by the court included:
The court deemed the housing levy unconstitutional, granting a favorable decision for the petitioners.
The court acknowledged substantial evidence supporting the claim that the National Assembly had done public participation and received comments about the bill through memoranda. While the MPs accepted some proposals, they rejected others.
The petitioners' challenges regarding the constitutionality of specific taxes introduced by the finance act were dismissed. The court asserted that Parliament had the constitutional authority to impose taxes, upholding the legality of the taxes in question.
The court evaluated several constitutional issues surrounding the passage of the finance act of 2023.
The court determined that the national assembly had violated the constitutional process by approving the Appropriation Bill and Act before the presentation of the Budget Proposal by the Cabinet Secretary for the National Treasury.
The Speaker's ruling, which allowed the Finance Bill to be prioritized before the Budget Statement, was found to be unconstitutional. The court emphasized that the Appropriation Bill cannot be introduced without approving the revenue estimates, which must be based on the Division of Revenue Bill.
The court also addressed the High Court's interpretation of its jurisdiction, concluding that the High Court had erred in holding that it lacked jurisdiction to intervene in matters of policy, particularly where constitutional violations were at stake.
On taxation, the court found that certain provisions of the Finance Act, 2023, which introduced tax amendments post-public participation, were unconstitutional due to procedural flaws in the legislative process.
Therefore, the court declared sections 24(c), 44, 47(a)(v), 100, and 101 of the Finance Act, 2023 unconstitutional for bypassing required legislative stages, including publication, first reading, and second reading, contrary to Articles 10 and 159 of the Constitution.
The supreme court overturned a previous court of appeal decision that had declared the finance act of 2023 unconstitutional
The high court had initially declared some provisions unconstitutional, but the court of appeal went further, declaring the entire law invalid.
The supreme court emphasized the importance of maintaining fiscal stability, given the significant public interest in the matter.
The court acknowledged the potential disruptions that would arise if the act were invalidated, including a substantial revenue shortfall.
Judges of the apex court further noted that the national assembly had met the constitutional requirements for public participation, despite the objections raised.
Importantly, the court found that certain provisions of the act, notably sections 76 and 78, were unconstitutional due to their nature, as they were not directly related to the finance bill, but judges ruled that the rest of the act could remain in force.
As a result, the government will continue collecting taxes under the finance act of 2023, including a controversial VAT on fuel.