Supreme Court Partially Rejects Finance Act 2023, Declares Some Taxes Unconstitutional

The Supreme Court has issued its final decision on the consolidated appeals surrounding the Finance Act, 2023, addressing both constitutional challenges and jurisdictional objections. The Court began by overruling a preliminary objection on its jurisdiction, affirming its authority to adjudicate on this matter. This foundational move allowed the Court to delve into the contentious provisions of the Act and its broader implications for Kenyan governance and public finance.

One of the critical highlights of the ruling is the Supreme Court’s decision to set aside the Court of Appeal’s blanket finding that declared the entire Finance Act, 2023 unconstitutional. Instead of invalidating the Act in its entirety, the Supreme Court has opted for a nuanced approach, partially upholding certain findings from the Court of Appeal while addressing specific provisions that infringe upon constitutional requirements. This approach underscores the Court’s commitment to preserving legislative intent while safeguarding constitutional principles.

The Affordable Housing Levy, introduced through Section 84 of the Finance Act, 2023, was deemed moot by the Court. The question surrounding the legality of the Affordable Housing Levy was already resolved by a prior judgment at the Court of Appeal. By acknowledging the mootness of this issue, the Supreme Court effectively eliminated any need for further debate on the matter, reaffirming that judicial resources should be conserved for unresolved legal questions.

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Furthermore, the Court upheld the unconstitutionality of Sections 76, 78, and 87 of the Finance Act, which amended the Kenya Roads Act, 1999, and the Unclaimed Financial Assets Act, 2011. The Court reasoned that these amendments were neither incidental to nor directly connected to a money Bill, thus violating Article 114 of the Kenyan Constitution, which outlines the scope of money Bills. This part of the decision highlights the Court’s rigorous interpretation of the law, reinforcing the notion that provisions within a money Bill must adhere to strict constitutional definitions and cannot exceed their intended purpose.

The dismissal of cross-appeals from multiple respondents, specifically the 15th to 19th, 22nd, and 38th to 49th respondents, underscores the Court’s alignment with the core legal arguments presented by the appellants. These dismissals signal that the Court found no substantive grounds to overturn the decisions made by lower courts on these particular appeals, thus maintaining judicial consistency and integrity across multiple levels of adjudication.

In its directives, the Supreme Court also mandated that each party bears its costs from the consolidated appeal and cross-appeals, reflecting a balanced approach to legal expenses. This decision indicates the Court’s awareness of the financial burdens imposed by prolonged litigation and its desire to prevent further punitive financial impacts on the parties involved. It suggests an equitable sharing of costs, an outcome that may serve as a precedent for cost-bearing in future public interest litigation.

Another key aspect of the judgment is the order for the refund of security costs deposited in the consolidated appeal to the depositor(s). This decision likely aims to provide relief to the appellants, recognizing the often substantial financial toll of pursuing complex constitutional litigation. By directing this refund, the Court is signaling a recognition of the appellants’ rights to reclaim their deposits, especially in a case with such significant public interest.

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The ruling as a whole can be seen as a balancing act between legislative intent and constitutional adherence. While the Court has avoided a blanket invalidation of the Finance Act, it has selectively struck down provisions that breach constitutional boundaries, highlighting its commitment to judicial restraint and principled intervention. The Supreme Court’s careful scrutiny of the amendments to the Kenya Roads Act and Unclaimed Financial Assets Act reflects its firm stance on the importance of procedural integrity in legislative amendments.

This decision will have a lasting impact on the scope of money Bills and legislative procedures in Kenya. The ruling reinforces the need for Parliament to adhere strictly to constitutional guidelines when enacting laws, especially when dealing with revenue-raising mechanisms. The judgment sends a clear message that even well-intentioned legislative efforts must comply with constitutional requirements, and deviations will not be tolerated by the judiciary.

Ultimately, the Supreme Court’s decision in this case serves as a testament to the role of the judiciary as a guardian of the Constitution. By invalidating specific provisions while preserving the overall framework of the Finance Act, the Court has underscored its role in safeguarding the rule of law and ensuring that every provision in a law aligns with the Kenyan Constitution. This ruling not only impacts the present Finance Act but also sets a precedent for future legislation, emphasizing that the pursuit of fiscal objectives must always respect constitutional boundaries.

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