Kenya’s Supreme Court Suspends Ruling That Invalidated 2023 Finance Act, Preserves Tax Measures Pending Appeal
Fiona Nanna, ForeMedia News
6 minutes read. Updated 9:00AM GMT Tues, 20August, 2024
Kenya’s Supreme Court has temporarily suspended a lower court’s decision that declared the 2023 Finance Act unconstitutional, maintaining the controversial legislation’s enforcement while the government appeals the ruling. The Court of Appeal’s previous decision, which nullified the Finance Act, posed a significant challenge to President William Ruto’s administration, threatening to disrupt the country’s already fragile budgetary stability.
Background of the Finance Act 2023
The Finance Act, a critical piece of legislation presented annually, outlines Kenya’s tax and revenue measures. It serves as a financial blueprint that the government relies on to fund its development programs, manage public debt, and meet obligations to international lenders such as the International Monetary Fund (IMF). The Court of Appeal’s ruling against the 2023 Finance Act, which followed a similar rejection of last year’s Finance Act, delivered a severe blow to the government’s fiscal strategy.
Political and Economic Implications
The Supreme Court’s intervention comes at a critical juncture, following significant public unrest earlier in the year. President Ruto had withdrawn this year’s finance bill in June, succumbing to mass protests led by youth and opposition parties. The unrest underscored the tension between the government’s fiscal policies and the public’s resistance to tax hikes amidst economic hardship.
President Ruto’s administration has been caught in a delicate balancing act. On one hand, the government needs to address the economic grievances of a population struggling with the rising cost of living. On the other, it must satisfy the stringent fiscal requirements of international lenders who advocate for increased tax revenues as a means to stabilize the economy and reduce national debt.
The 2023 Finance Act includes controversial measures such as doubling the value-added tax (VAT) on fuel, introducing a housing tax, and raising the top personal income tax rate. These provisions sparked fierce opposition, leading to widespread protests last year that turned violent in several instances.
Supreme Court’s Rationale and Upcoming Appeal
In its ruling, the Supreme Court emphasized the need to maintain budgetary stability while the appeal process is underway. The court argued that suspending the enforcement of the Finance Act could lead to a fiscal crisis, further exacerbating the economic challenges facing the country. The hearings on the constitutionality of the 2023 Finance Act are scheduled for September 10 and 11, during which the government is expected to present its case for maintaining the tax measures outlined in the law.
The Kenyan government, which has continued to collect taxes under the 2023 Finance Act following the withdrawal of this year’s bill, has not yet issued a formal response to the Supreme Court’s decision. The outcome of the upcoming appeal could have far-reaching implications for the country’s fiscal policy and President Ruto’s political future.
