Finance Act of 2023 Case

A challenge to the Finance Act of 2023 that raised taxes with little public participation | Constitutional Petition No. E228 of 2023
Case filed: July 4, 2023 Current status: Case Ongoing
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Petitioners

  • Kenya Human Rights Commission
  • Katiba Institute
  • The Institute for Social Accountability (TISA)
  • Transparency International Kenya
  • International Commission of Jurist – Kenya (ICJ Kenya)
  • Siasa Place
  • Tribeless Youth

Respondents/ Appellants

  • National Assembly
  • Attorney-General

Interested Parties

  • Law Society of Kenya

Status Updates

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 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 2023.

CJ Martha Koome set up a three-judge bench, including Justices David Majanja, Christine Meori, and Lawrence Mugambi, to hear cases against the Finance Act 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 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.

Summary of facts

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.

CASE OUTCOME: High Court judgment (November 28, 2023)

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:

  1. Unconstitutionality of the Housing Levy

 The court deemed the housing levy unconstitutional, granting a favorable decision for the petitioners.

  1. Public participation

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.

  1. Constitutionality of enacted taxes

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.

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