Supreme Court Explains Why Finance Act 2023 Is Legal
This move now allows the government to continue revenue collection and fiscal operations under the Act’s legislative framework.
Viral Tea Ke Writer 
The Supreme Court of Kenya on Tuesday, October 29 set aside the Court of Appeal's decision that declared the Finance Act 2023 unconstitutional.
In their ruling, the seven judges of the apex court, led by Chief Justice Martha Koome stated that the Finance Act 2023 is lawful, meaning that the Act remains in effect. This move now allows the government to continue revenue collection and fiscal operations under the Act’s legislative framework.
The judges ruled that public participation on the Finance Act 2023 was lawfully conducted. "The preliminary objection on this Court's jurisdiction is overruled," ruled the Supreme Court adding, "We hereby set aside the Court of Appeal's finding declaring the entire Finance Act, 2023 unconstitutional."
The judges upheld the Court of Appeal’s decision that the question relating to Section 84 (Affordable Housing Levy) introduced by the Finance Act, 2023 before the Court of Appeal was moot.
President William Ruto signs Finance Bill 2023 into Law at State House, Nairobi on Monday, June 26, 2023. /PCS
They also concurred with the Appellant court that Sections 76 and 78 of the Act amending Section 7 of the Kenya Roads Act, 1999; Section 87 of the Act amending Section 28 of the Unclaimed Financial Assets Act, 2011 are unconstitutional as they were neither incidental to nor directly connected to a money Bill.
“The Consideration of the Finance Bill (National Assembly Bill No. 14 of 2023)’ met the threshold of a reasonable measure for considering proposals, views and suggestions from the public, with respect to the public participation exercise conducted on the Finance Bill, 2023. m),” the highest court in the country ruled.
“In line with Article 221 (6) of the Constitution, Estimates of Revenue are not a component of the Appropriations Act. The preparation and tabling of the estimates of revenue and expenditure precede the preparation and tabling of the Appropriation Bill. The Estimates of Revenue and expenditure for the FY 2023/2024 were tabled and considered before the National Assembly as required by law.”
The seven Judges also maintained that estimates of Revenue and expenditure for the FY 2023/2024 were tabled and considered before the National Assembly as required by law. They also ruled that public participation was lawfully conducted and Parliament is not required to undertake fresh public participation.
“Bearing in mind the time-sensitive nature of a Finance Bill, it is unreasonable to require, or subject amendments intended to give effect to proposals and suggestions from a public participation exercise to another fresh round of public participation,” the Apex court said in its ruling.
With this ruling, the Act therefore remains in force, and all taxes collected under this Act are valid. On August 20, the Apex court issued conservatory orders temporarily halting the Court of Appeal's decision that declared the Finance Act 2023 null and void.
The interventional move by the apex court granted the government a crucial reprieve, allowing it to continue enforcing the Finance Act 2023 while the legal battle progressed.
The Court of Appeal's previous judgment, handed down in July, had found that the Finance Act, 2023, contravened Articles 220(1)(a) and 221 of the Kenyan Constitution, as well as sections 37, 39A, and 40 of the Public Finance Management Act (PFMA), which outline the budget-making process.
This ruling sparked widespread uncertainty among employers and taxpayers, who had been grappling with confusion over applicable tax bands and financial regulations.
The 2023 Finance Act was met with intense scrutiny and legal battles, primarily due to contentious measures such as a significant increase in the value-added tax on fuel, the introduction of a housing tax, and a hike in the top personal income tax rate. These changes sparked a wave of political opposition and violent street protests.
This latest Supreme Court ruling comes as a reprieve to President William Ruto's administration, which had been operating without a Finance Act to govern taxation and related financial issues. Further complicating the situation was a vote by members of Kenya's National Assembly to delete the entire Finance Bill 2024 in its entirety.
