Okiya Omtatah moves to block MPs from considering Finance Bill

Okiya Omtatah

Busia Senator Okiya Omtatah.

Photo credit: Pool

The Finance Bill, 2024, is facing legal hurdles after Busia Senator Okiya Omtatah moved to court seeking to stop Parliament from considering the taxation measures proposed by the Kenya Kwanza administration, to finance the 2024/25 budget.

Mr Omtatah and Mr Eliud Karanja Matindi have faulted Parliament for prioritising the Finance Bill, 2024, before considering and approving the Appropriations Act, 2024, contrary to the procedure. The Bill, currently before the National Assembly, is critical in financing Kenya’s Sh3.9 trillion budget for the next financial year that starts in July.

It was read a first time in the National Assembly on May 13, before it was committed to the Departmental Committee on Finance and National Planning for consideration.

National Assembly Clerk Samuel Njoroge invited members of the public and stakeholders to submit memoranda on the Bill to the committee.

“That pending the hearing and determination of the application and/or the petition, the Honourable Court be pleased to suspend the ongoing public participation on the Finance Bill, 2024, which is being conducted by the National Assembly through an advert dated May 15, 2024,” Mr Omtatah pleaded.

Last year, the Finance Act, 2023, faced stiff opposition with the matter ending up in court where a bench of three High Court judges agreed that the imposition of Housing Levy to only those in formal employment was discriminatory and therefore illegal.

President William Ruto’s administration had to come up with an Affordable Housing Act, which sees employees pay 1.5 per cent of their gross monthly salaries, and matched by their employers, to continue with the deductions.

Under the new law, Kenyans in the informal sector are also expected to pay 1.5 per cent of their monthly gross earnings to fund President Ruto’s pet housing project.

The matter is currently pending before the Court of Appeal.

The Affordable Housing Act, too, was challenged and Chief Justice Martha Koome recently appointed a bench of three judges of the High Court to determine the petitions.

In the current case, Mr Omtatah argues that the Bill has been tabled prematurely in the House as there is no approved fiscal framework for the Financial Year 2024/25, which it is supposed to implement.

The Senator said the approved fiscal framework will only come to life with the enactment of the Appropriation Act, 2024.

Insurance cover

Among the revenue raising measures introduced in the Bill is value added tax (VAT) on bread and an increase of excise taxes on M-Pesa, airtime and bank transfers, spirits and cigarettes, from which the government seeks to raise an additional Sh323 billion in taxes in the financial year that starts in July.

President Ruto’s administration, however, avoided imposing new payroll taxes to avoid angering some individuals and groups who last year challenged the tax measures in court.

But the 16 per cent value added tax (VAT) on bread will see the cost of a 400-gramme loaf increase by at least Sh10, hitting hard a majority of Kenyan households.

The 2024 Finance Bill also introduces a new 2.5 per cent motor vehicle circulation tax that will see motorists pay up to Sh100,000 annually to keep their vehicles on the roads.

The minimum top-up tax and the annual motor vehicle tax will be paid together with insurance charges, if the proposal sails through.

The motor vehicle tax shall be payable to the Kenya Revenue Authority (KRA) on each motor vehicle at the time of the issuance of an insurance cover and it shall be payable based on the value of the motor vehicle.

Income Tax Act

Clause 27 of the Bill further seeks to amend the eighth schedule of the Income Tax Act by deleting the definition of a company.

“A company includes a body of persons which carries on the activities of a members’ club or trade association that is deemed to be carrying on a business,” reads the new proposed definition of a company that effectively ropes women’s groups within the tax bracket.

The Bill further proposes a 25 percent excise duty on both crude and refined vegetable oils, a proposal that edible oil manufacturers have warned would lead to an increase in price of cooking oil by up to 90 per cent.

Mr Omtatah argues that it is only after Parliament has procedurally enacted the Appropriation Act, 2024, that the Finance Bill, 2024, can lawfully and constitutionally be introduced in the National Assembly.

“If this court does not intervene in real time to suspend the process, both this application and the petition will be lost because the unlawful and unconstitutional Finance Bill, 2024, will be approved by Parliament and signed into law by the President to become the Finance Act, 2024,” the Busia Senator said.

He also wants the court to certify the petition as raising important questions of law and refer it to Justice Koome for appointment of a bench of uneven number of judges.