Blow to Ruto as Court of Appeal rules Finance Act, 2023 unconstitutional

The Court of Appeal has put the final nail in the coffin of Finance Act, 2023 by upholding the finding by the High Court that declared it unconstitutional, dealing another blow to the Kenya Kwanza government. 

While dismissing an appeal by Parliament, the judges said the process leading to the enactment of the Finance Act, 2023 was fundamentally flawed and in violation of the Constitution as it was done without public participation.

“Accordingly, we hereby issue a declaration that the enactment of the Finance Act, 2023 violated Articles 220 (1) (a) and 221 of the Constitution as read with sections 37, 39A, and 40 of the PFMA which prescribes the budget-making process, thereby rendering the ensuing Finance Act, 2023 fundamentally flawed and therefore void ab initio and consequently unconstitutional,” Justices Kathurima M’Inoti, Agnes Murgor and John Mativo said on Wednesday, July 31.

The judges said contrary to the law, 18 new provisions were introduced by Parliament without subjecting them through the entire legislative stages, including the First and Second Reading. The judges said the moves were serious legislative flaws that cannot be permitted.

They said enactment into law was imperfect and a mockery to the legislative process as contemplated in the Constitution and the Standing Orders.

“Accordingly, we hereby issue a declaration that the enactment of the Finance Act, 2023 violated Articles 220 (1) (a) and 221 of the Constitution as read with sections 37, 39A, and 40 of the PFMA which prescribes the budget making process, thereby rendering the ensuing Finance Act, 2023 fundamentally flawed and therefore void ab initio and consequently unconstitutional,” they said.

The appellate court judges ruled that sections 18, 21, 23, 24, 26, 32, 34, 38, 44, 47, 69, 72, 79, 80, 81, 82, 83, 85, 86, 100, 101, and 102 of the Finance Act, 2023 were illegal as they were introduced post-public participation. The sections amended the Income tax Act, Value Added Tax Act, Excise Duty Act and Miscellaneous Fees and Levies Act, Kenya Revenue Authority Act and the Retirement Benefits Act.

Other sections amended were the Alcoholic Drinks Control Act of 2010, Special Economic Zones Act and Export Processing Zones Act.

The judges said the laws should have been subjected to fresh public participation.

Did not address Housing Levy

The judges, however, declined to address the issue of the Housing Levy, which was declared unconstitutional by the High Court in a separate case, saying there was no live controversy requiring their determination on the question of the unconstitutionality of section 84 of the Act, which introduced the levy.

A bench of three judges had found that the imposition of the Housing tax against persons in formal employment to the exclusion of other non-formal income earners to support the national housing policy is without justification, unfair, discriminatory and irrational.

“Consequently, it is our considered view that the question of the declaration of unconstitutionality of section 84 of the Act which introduced the Affordable Housing Levy without a legal framework and whether the levy was discriminatory has been rendered moot by the enactment of the Affordable Housing Act, 2024,” said the judges.

Another case challenging the Affordable Housing Act is currently pending before the High Court.