The High Court Thursday quashed the laws, including the Finance Act 2018, the Tax Laws (Amendments) and the Statute Law (Miscellaneous Amendment), that were passed by the National Assembly without the Senate’s nod.
The judges gave lawmakers nine months to ensure that the laws have the backing of the Senate or have 23 laws abolished.
This means that consumers will continue paying the taxes up to July, offering relief to the Kenya Revenue Authority (KRA) that is struggling to meet revenue targets in the wake of coronavirus economic hardships.
Taxes on fuel, M-Pesa transfers and an Sh18 a litre levy on kerosene are contained in 23 laws that were yesterday declared illegal after the High Court ruled were passed without the input of the Senate.
The High Court Thursday quashed the laws, including the Finance Act 2018, the Tax Laws (Amendments) and the Statute Law (Miscellaneous Amendment), that were passed by the National Assembly without the Senate’s nod.
The judges gave lawmakers nine months to ensure that the laws have the backing of the Senate or have 23 laws abolished.
This means that consumers will continue paying the taxes up to July, offering relief to the Kenya Revenue Authority (KRA) that is struggling to meet revenue targets in the wake of coronavirus economic hardships.
“We are properly guided, and in the circumstances of this case we shall suspend our orders nullifying the impugned Acts for a period of nine months from the date of this judgment within which period the respondents ought to have complied with the provisions of Article 110 (3) of the Constitution and regularised these Acts and in default they stand nullified,” the three High Court judges ruled.
“As a court we can do no more or less than what we are duty-bound to do, which is to declare the impugned laws what they are -- a nullity.”
The Finance Act of 2018 contained the bulk of the taxes that are at risk of being nullified.
These include the eight percent value added tax (VAT) that was introduced in September 2018 on petrol and diesel prices that had led to public anger and strikes.
The government, under pressure to hit IMF-mandated fiscal deficit targets, had faced a fuel dealers’ strike, anger among commuters and a lawsuit after transport and fuel prices jumped when a 16 percent value-added tax (VAT) on all petroleum products entered into force in September 2018
Plans for the tax on fuel had been postponed several times since 2013. President Uhuru Kenyatta later cut the VAT to eight percent instead.
The affected Act also introduced higher taxes on mobile money transfer services like M-Pesa and other money transfer services.
The excise duty on mobile money transfer fees rose from 10 percent to 12 percent, prompting firms like Safaricom to increase the cost of transferring cash.
Safaricom had opposed the tax rise on mobile phone-based transfers, arguing that it would mostly hurt the poor, most of whom do not have bank accounts and rely on services such as M-Pesa.
Yesterday, while affirming role and powers of the Senate in legislation, the bench, comprising Justices Jairus Ngaah, Anthony Ndung’u and Teresiah Matheka, said the passage of the 23 laws was contrary to the Constitution, a number of the laws related to counties and devolution.
The Senate moved to court last year to contest the National Assembly’s decision to conduct law-making business in exclusion of senators.
Low-income households suffered a double blow after the introduction of the anti-adulteration levy of Sh18 a litre levy on kerosene through the Finance Act 2018.
The levy was meant to discourage companies or individuals from mixing either petrol or diesel with kerosene and selling it to unsuspecting motorists.
Energy regulator said that kerosene consumption had last year fallen to 15 million litres from 42 million litres, underlining the impact of the levy, which must now be backed by the Senate.
The law that demands traders who run micro and small scale businesses like grocery stores and salons pay presumptive tax at the rate of 15 percent of the single business permit fee issued by county governments has also been affected by the court action.
The presumptive tax allowed the KRA to gather additional data on small traders, setting the stage for the return of the turnover tax.
If the laws are nullified, winners of bets will also have to pay more taxes given they will part with 20 percent duty on the gross and not the net winnings.
Another law affected by the judgment is The National (Amendment) Health Laws.
Though health is a devolved function, the National Assembly adopted the Bill and passed it without involving the Senate.
The law gave Kenya Medical Supplies Authority (Kemsa) exclusive right to supply medicine and medical equipment to the county governments.
The contentious Computer Cyber Crime Act, which tamed bloggers and other Internet users, was also affected by the judgment.
The Act recommends a fine of Sh20 million or a prison term of 10 years, or both, for harassing a person through the Internet by making posts that are indecent or grossly offensive.
The Statute Law (Miscellaneous Amendments) Act, 2018, which provided for the establishment of the National Integrated Identity Management System (NIIMS) or Huduma Namba, is also at risk.
The other contentious laws are the Public Trustee Amendment Act, Building Surveyors Act, Tax Laws Act, the Kenya Coast Guard Service Act, Supplementary Appropriation Act, Equilization Fund Appropriation Act, the Finance Act No 10 of 2018 and the Capital Markets Act.
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