The Goose That Lays the Golden Egg: Is the Finance Act 2023 On The Verge Of Repeal?

The Finance Act 2023 is expected to raise an additional 211.0 billion shillings from all tax brackets – the largest chunk comes from income tax. 

The High Court declined to lift conservatory orders which suspended the Act. The respondents (comprising the Executive and the National Assembly), also sought abeyance of the ruling in order to move to the Court of Appeal, which was also declined.

The Court agreed with the petitioners that the case raised substantial Constitutional issues of law and fact. The petitioners are led by Busia Senator Okiya Omtatah Okoiti, an activist turned politician with a long history of taking on high-profile litigation in the public interest.

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The Petitioners argue that the Finance Act 2023 was enacted in violation of the Constitution and the Public Finance Management Act by failing to submit contents of the Finance Bill 2023 to the Senate for input as required by the Constitution – and that it would therefore not have birthed the Finance Act 2023. The concurrence of the Speakers of the National Assembly and Senate is a mandatory preliminary step in the legislative process. Some specific provisions are listed and argued to have been unconstitutionally enacted into law without being subjected to consideration by the Senate. 

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Another argument made by the applicants is that the Finance Bill 2023 went beyond incidental matters relating to tax, therefore exceeding the threshold as a money Bill. This included proposed changes to Employment Act (2007), The Special Economic Zones Act (2015), The Export Processing Zones Act (2015), Kenya Roads Board Act (1999), Kenya Revenue Authority Act (1995), and the Retirement Benefits Act (1997). The petitioners also argue that some aspects (four laws) of the Finance Bill were sneaked into the Finance Bill without public participation. They sought to have these four and the original 13 laws introduced after the public participation stage was voided. 

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The petitioners also argue that the housing levy as proposed cannot be included in the Finance Act 2023 as the Act can only contain measures to collect revenue to finance the budget estimates. If it is to be included in the Finance Act, then a fund would have to be created first. 

Other issues raised by the petitioners is that there were no revenue estimates in the Appropriation Bill (Budget Estimates), rendering the Finance Act unconstitutional as the Act appears to authorize measures to raise revenue not contained in the 2023/2024 Appropriation Act. It is the revenue estimates which disclose the amounts expected to be realized from each tax measure taken. They, therefore, argue that both the budget Estimates and the Appropriation Act 2023 were incomplete and could not have been used to enact a Finance Act.  

The Finance Act 2023 was also supposed to have been enacted within 90 days after passing the Appropriation Bill, but it was passed concurrently with the estimates. 

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The petitioners argue that the monumental procedural infractions stated above could not be cured and that the Finance Bill 2023 and the resultant Finance Act 2023 were unconstitutional. The prayer sought from the Court by the petitioners was to suspend the Finance Act 2023 in its entirety until it determines its constitutionality and legal validity before it allows them to be imposed on Kenyans.

We think the matters raised in this petition are weighty, and while legal arguments are yet to be made, we worry about the eventual outcome. This success of the petition may involve a repeat of some of the elements of the budget-making process. This could provide some uncertainty and delay some of the development projects set out.

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Data and content from Standard Investment Bank (SIB)