The Treasury has pleaded with the Supreme Court to overturn a decision of the Court of Appeal quashing the Finance Act, 2023, arguing that the government will lose Sh214 billion if the judgment is upheld.
Appearing before the apex court on Tuesday, Treasury Cabinet Secretary John Mbadi, through senior counsel Githu Muigai, said the appellate court’s decision declaring the Act as unconstitutional will derail the government’s economic agenda and erase benefits to the public.
Prof Muigai added that the Act was enacted to streamline tax policies and the fiscal consolidation framework—which seeks to boost revenue collection, narrow the budget deficit and cut the appetite for debt.
The law was challenged in court following a round of street protests that turned violent, after the government used it to double the value added tax on fuel, introduce a housing tax, and raise the top personal income tax rate, among other measures.
Its nullification by appellate court inflicted a new blow to the government of President William Ruto who withdrew this year’s Finance Bill after deadly protests that killed over 50 people.
This withdrawal of Finance Bill 2024 forced the government to discard taxes worth more than Sh346 billion.
At the Supreme Court, the National Assembly through lawyer Issa Mansur has backed the Treasury on the Finance Act 2023, adding that Parliament conducted adequate public participation and incorporated the citizens’ input.
“The Finance Bill, 2023 was published in the Kenya Gazette…. on 28th April 2023 and tabled in the National Assembly for the first reading and committal to the relevant committee on 4th May 2023, after which the National Assembly sent out notices through print media calling for memoranda. Members of the public and stakeholders were accorded sufficient opportunities to present their views during public hearing,” he said.
Mr Mansur said the National Assembly received approximately 161 structured submissions, over 300 general email submissions and more views during the public hearings at the Kenyatta International Convention Centre (KICC), Nairobi where over 800 participants showed up.
“All the submissions received were diligently reviewed and deliberated on by the Finance and National Planning Committee, informing most of the amendments that were adopted into the Finance Act, 2023,” he said.
The lawyer said that only 13 proposals were rejected by the parliamentary committee, which represents a mere 3.0 percent of all the proposals, and that it was therefore wrong for the court to nullify the entire Act.
Mr Mansur submitted that the Court of Appeal also erred in finding that Parliament included 18 totally new provisions, which were not subjected to public participation.
The lawyer said the court failed to appreciate that the amendments were introduced in accordance with the parliamentary Standing Orders, informed by submissions from public participation and considered by the House.
“By requiring every amendment introduced post public participation to undergo a full formal process as if it were a new Bill, the judgment of the Court of Appeal creates unreasonable and in respect of the Finance Bill, impractical procedural bottlenecks especially considering the timelines,” he added.
The court’s verdict was in respect of an appeal of another one from the High Court late last year, which largely left the Finance Bill intact, only striking out the housing levy.
The government pushed through a new law to allow it to continue collecting the housing tax after that ruling and that law is also being challenged in court. It has been relying on the 2023 finance law to continue collecting taxes after Dr Ruto withdrew this year’s Bill.
The Treasury says the higher taxes are necessary to fund development while paying off a heavy public debt load that currently exceeds the recommended level by the International Monetary Fund and the World Bank.
Mr Mansur said requiring fresh public participation for every amendment arising from the initial public participation process would create an unending cycle, derailing the legislative process.
“Such a requirement would effectively negate the purpose of the initial public participation, as any changes resulting from that process would trigger a new round of consultation. To require Parliament to consult the public on their own views would result in an unending cycle of consultation on legislation. This was not the constitutional intent,” he said.
