Published on 31/07/2024
Kenya’s Court of Appeal on Wednesday ruled that the government’s 2023 finance law unconstitutional, delivering a significant setback to President William Ruto’s administration. The ruling comes after Ruto had already withdrawn this year’s finance bill in response to deadly protests.
Finance bills, introduced at the beginning of each financial year, are crucial for the government to outline its revenue-raising strategies, including tax increases and new levies.
The 2023 finance law faced legal challenges after a wave of politically driven protests, which turned violent following the government’s decision to double the value-added tax on fuel, introduce a housing tax, and raise the top personal income tax rate, among other controversial measures.
“A further declaration is hereby issued that the failure to comply with this constitutional dictate renders the entire Finance Act, 2023 unconstitutional,” a three-judge bench of the Court of Appeal said in a ruling.
The court’s verdict was in response to an appeal against a previous High Court ruling from late last year, which largely upheld the 2023 finance bill, except for striking down the housing levy. In response, the government enacted a new law to continue collecting the housing tax, but this law is also facing legal challenges.
The government which has been relying on the 2023 finance law to maintain tax collections after President Ruto withdrew this year’s bill, has not yet commented on the ruling. It has the option to appeal the Court of Appeal’s decision to the Supreme Court, the highest judicial authority in the country.
In the wake of youth-led violent protests that erupted last month, President Ruto fired all but one of his ministers and has since nominated a new finance minister. Ruto argues that higher taxes are essential for funding development programs and managing the country’s public debt, which has surpassed levels recommended by the International Monetary Fund and the World Bank.
The government has also submitted a new economic plan to the IMF and anticipates that the fund’s board will review it by the end of August.
