Economy
Court deals State another blow in Sh210 billion tax fight
Tuesday July 11 2023
Cabinet Secretary, National Treasury & Economic Planning Njuguna Ndung’u on May 17, 2023. PHOTO | DENNIS ONSONGO | NMG
The High Court has suspended the Finance Act, 2023 indefinitely in spite of the Treasury’s argument that government operations will grind to a halt due to the freeze on the collection of some taxes.
Justice Mugure Thande extended the freeze granted on June 30 until the case filed by Busia Senator Okiya Omtatah and six others is determined, handing taxpayers and consumers a reprieve.
Read: Mixed bag for taxpayers in 51 Finance Bill changes
Treasury Cabinet Secretary Njuguna Ndung’u had submitted that suspending the new tax law would lead to a shutdown of government operations.
But the submissions were rejected by the petitioners arguing that what has been suspended is the new levies and taxes introduced by the Finance Bill.
“Additionally, the lifting of conservatory orders will militate against the public interest as there is a real risk of the public being subjected to a non-constitutional law, should the petition succeed,” the judge said.
The suspension is the biggest setback yet to the rollout of President William Ruto’s first budget and has put brakes on new levies, including the controversial housing levy.
The Kenya Kwanza administration hopes to raise more than Sh211 billion in additional taxes from the suspended Finance Act.
Prof Githu Muigai, Kiragu Kimani and Mahat Somane for the Attorney-General, Justin Muturi and Prof Ndung’u, submitted that the Finance Bill is prepared annually and that there is no framework for reverting to the previous Finance Act.
“The Bill that was subjected to public participation as admitted by the petitioners in the amended petition and in paragraph 64B the petitioner clearly states that there was a call to stakeholders and general members of the public to comment on the Bill which brought about the committee receiving a total of 1080 memoranda with their comments on the bill,” Prof Ndung’u said through his lawyers.
But senior counsel Otiende Amollo dismissed the claims saying “It has been 12 days since the Act was suspended and the government has not shut down. There are mechanisms for continuity of the Finance Act, 2022,” he said. The lawyer said income tax is being paid as is import duty and that what has been suspended are new taxes and levies, which were introduced in the Finance Act, 2023.
Prof Ndung’u had pleaded with the court to lift the suspension imposed on the implementation of the Act, which came into effect on July 1, to allow him to challenge the ruling at the Court of Appeal.
But the judge declined the application, stating that the substratum of the case would be rendered useless if the conservatory order were lifted.
The court added that the prejudice that will be suffered by the petitioners and the general public by being subjected to a law that may ultimately be determined to be unconstitutional, far outweighs the prejudice that is to be suffered by the government, if the petition were to fail.
“Suffice it to say, however, upon evaluation of the rival submissions of the counsel, I find no difficulty that the petitioners have established a prima facie case with a probability of success,” the judge said.
A determination in favour of the petitioners, she said, would be of no use to them and the public if, in the meantime, they were subjected to the challenged Act.
The court ruled that the petition had raised substantial questions of law and directed the files to be taken to Chief Justice Martha Koome to appoint a bench of more than two judges to determine it.
The judge also found several other suits, including those filed by the Trade Unions Congress of Kenya, Kenya Human Rights Commission, and the Law Society of Kenya challenging the Finance Act, 2023, had raised substantial questions of law and directed the files to be transmitted to the Chief Justice for appointment of a bench to hear them.
The bench will decide whether the petitions will be consolidated with the earlier one filed by Omtatah and others on a date to be given later.
Busia senator Okiya Omtatah and six others challenged the Act arguing that the failure to present the Finance Bill 2023 to the Senate violated section 40(3) of the Public Finance Management Act, 2012.
Read: 90 percent of Kenyans reject Finance Bill 2023
He argued that the Public Finance Management Act provides that the Cabinet Secretary shall submit to Parliament [not to the National Assembly alone] the Finance Bill, setting out the revenue-raising measures for the national government together with a policy statement expounding on these measures.
Mr Omtatah holds that pursuant to Article 110 (3) of the Constitution, it is mandatory that before the Bill can be introduced for consideration in the originating House, a Speaker of one House of Parliament must first seek the concurrence of the Speaker of the other House as to whether the Bill in issue concerns counties.
Prof Ndung’u in reply argued that the impact of these tax amendments on the general populace will be mitigated by concurrent efforts to improve public services, increase public investment, and stimulate economic growth.
