Supreme Court of Kenya Reinstates 2023 Tax Act. The Supreme Court of Kenya has reinstated the Finance Act 2023, suspending a previous ruling by the Court of Appeal that had declared the law unconstitutional.
This decision allows the government to resume tax collection under the contested law, averting a potential financial crisis.
In a ruling that prioritizes public interest, the seven-judge bench highlighted the potential economic fallout if the Finance Act 2023 were invalidated.
The government was facing a projected revenue loss of KShs 214 billion, which would have severely impacted its ability to fund essential services and programs. The court emphasized that maintaining the current tax framework was crucial to avoid further budgetary disruptions.
“Given the significant public interest, we direct that the consolidated appeal be heard at the earliest possible date,” the judges stated. The case is scheduled for a virtual hearing on September 10 and 11, 2024.
The Finance Act 2023 had been under intense scrutiny, with petitioners arguing that its passage lacked proper public participation, leading to its initial nullification.
However, the government, supported by the National Treasury, Attorney General, and Kenya Revenue Authority, appealed the decision, citing the law’s necessity for maintaining fiscal stability.
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Supreme Court of Kenya Reinstates 2023 Tax Act: Continuous Burden for Kenyans
The Supreme Court’s ruling means that Kenyans will continue paying taxes under the Finance Act 2023, including the contentious 16% value-added tax on fuel.
The court acknowledged that reverting to the Finance Act 2022 would create significant operational challenges, including the costly and time-consuming task of updating revenue collection systems to reflect the old tax framework.
Cabinet Secretary for the National Treasury, who was one of the appellants, warned that invalidating the 2023 Act could lead to a complete shutdown of government operations, both at the national and county levels.
The appellants also argued that the nullification would necessitate borrowing to cover the fiscal deficit, potentially increasing public debt and inflation.
Supreme Court of Kenya Reinstates 2023 Tax Act: A Reprieve for Government
The Supreme Court’s decision provides temporary relief for the government, which has been under pressure following protests against the Finance Bill 2024, which was eventually withdrawn due to public outcry. The bill had included new taxes aimed at raising KShs 346 billion to address the country’s growing fiscal deficit.
Despite the court’s ruling, the government is still navigating a challenging financial landscape. Treasury Cabinet Secretary John Mbadi has indicated plans to reintroduce some tax measures, including an eco-levy on non-essential goods, while dropping controversial taxes on essential items like sanitary pads. These measures are expected to be presented to parliament by September 30, 2024.
The government’s balancing act between public demands and fiscal responsibilities remains delicate, with the possibility of further unrest if new taxes are perceived as burdensome by the already struggling population.
However, the Supreme Court’s ruling has provided a temporary lifeline, allowing the government to maintain its current revenue streams while the broader legal battle over the Finance Act 2023 continues.
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