How recent events have shaped public finance discourse

The voice of common the man is finding a place in how the country’s fiscal affairs are managed amid public participation and litigation.

Photo credit: Lucy Wanjiru| Nation Media Group

Public finance entails several facets including revenue collection, debt management, State expenditure and related matters.

The Public Finance Management Act, 2012 is the main law that provides for effective overseeing of public finances by the national and county governments.

It also provides the oversight responsibility of Parliament and county assemblies as well as the different responsibilities of entities.

On the other hand, the Constitution is the supreme law of the Republic of Kenya, and it binds all persons and all State organs at both levels of government. It provides clear guidance on how public finance affairs should be conducted in the country.

Article 118 of the Constitution on public access and participation provides that Parliament should conduct its business in an open manner, and its sittings and those of its committees should be open to the public.

Parliament should also facilitate public participation and involvement in the legislative and other business of Parliament and its committees.

In a recent decision by the Court of Appeal on the constitutionality of the Finance Act, 2023 the Court ruled that while the actual public participation process was conducted in accordance with the law, the process of enactment of the Finance Act, 2023 was flawed for reasons that the National Assembly did not give the public written reasons for passing or rejecting the various amendments, many of which were contrary to the feedback received during the public participation process.

The Court of Appeal disagreed with the High Court which had said provision of the said reasons is merely a desirable result rather than a mandatory one.

It said public participation is not an inconsequential process or a sheer formality where collected views are taken into account.

Notably, this came just after the rejection of the Finance Bill, 2024 following widespread protests.

The protests were triggered by among other reasons, a perception that the government did not consider the views aired by a large proportion of the public during the public participation process.

A crucial principle of public finance provides that public finance system should promote an equitable society, and in particular the burden of taxation should be shared fairly.

The government is under pressure in a bid to increase revenue collections to cut the country’s increased reliance on debt to finance the annual budget. In formulating changes to the tax laws, it must ensure that it adheres to this principle.

The other principle of public finance provides that the revenue raised nationally should be shared equitably among the national government and county governments.

By and large, the conduct of public finance matters has been shaped by recent events that have in a short time span led to rejection of the Finance Bill 2024, declaration of the Finance Act 2023 as unconstitutional albeit the Supreme Court has issued a stay of application, among other events.

A large proportion of the citizenry is now following closely the country’s public finance discourse, and the government should be alive to this heightened level of scrutiny.

Maina is an associate director at Ernst & Young LLP (EY). The views expressed herein are not necessarily those of EY.

Notably, the allocation of revenue to county governments has remained a key issue over the years with county governments pushing for increased revenue allocations.

The national government has always maintained that the allocations meet the set constitutional threshold. Article 203 of the Constitution provides that at least fifteen percent of all revenue collected by the national government based on the most recent audited accounts of revenue received as approved by the National Assembly should be allocated to county governments.

Other principles of public finance are that expenditure should promote the equitable development of the country, including by making special provision for marginalised groups and areas.

Additionally, the burdens and benefits of the use of resources and public borrowing should be shared equitably between present and future generations; public money should be used in a prudent and responsible way; and financial management should be responsible, and fiscal reporting should be clear.

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