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.
The judges said the process leading to the enactment of the Finance Act, 2023 was fundamentally flawed and in violation of the Constitution.
“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 finance bills, which are presented to parliament at the start of every financial year, are the main vehicle for the government to set out its revenue-raising measures including tax hikes and the introduction of new levies.
The 2023 version was challenged in court following a round of political opposition-led street protests that turned violent, after Ruto’s government used it to double the value added tax on fuel, introduce a housing tax, and raise the top personal income tax rate, among other 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 respect of an appeal of another one from the High Court late last year, which largely left the finance bill intact, only striking out the housing levy.
The government pushed through a new law to allow it to continue collecting the housing tax after that ruling and that law is also being challenged in court.
The government, which has been relying on the 2023 finance law to continue collecting taxes after Ruto withdrew this year’s bill, did not immediately comment on the ruling.
The government can appeal the Court of Appeal ruling at the Supreme Court, which is the highest court.
Ruto has nominated a new finance minister after he fired all ministers but one in response to the youth-led violent protests that started last month.
Ruto says the higher taxes are necessary to enable the government to fund development programmes while paying off a heavy public debt load that currently exceeds the recommended level by the International Monetary Fund and the World Bank.
The government has submitted a new economic plan to the IMF and it expects the board of the fund to consider it at the end of August.
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