Kenyan court declares finance law unconstitutional

Judges ruled that the process leading to the enactment of the Finance Bill 2023 was flawed

Kenya’s Court of Appeal declared the Finance Act 2023 unconstitutional on Wednesday. The ruling comes after the government withdrew this year’s budget legislation following deadly protests.

Rejecting an appeal by the parliament, judges stated that the process which led to the enactment of the Finance Bill was “fundamentally flawed” and violated the constitution due to the lack of public participation. They declared several sections of the act unconstitutional, including a controversial housing levy.

Justices Kathurima M’Inoti, Agnes Murgor, and John Mativo ruled that Section 84 of the Finance Act 2023, which amended the Employment Act to introduce a housing levy, violated the principles of taxation by making a distinction between formal and informal sectors, branding it discriminatory.

The Court of Appeal further emphasized that parliament was obligated to provide reasons for either adopting or rejecting proposals received from the public during the participation process. “Failure to comply with this constitutional requirement renders the entire Finance Act 2023 unconstitutional,” the judges noted.

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A separate case challenging the Affordable Housing Act is currently awaiting a decision in the High Court.

The confrontation between Ruto’s government and the judiciary started last November, when the High Court issued orders stopping the government from implementing a new housing levy to fund its affordable social housing scheme. Judges said the new tax lacked a comprehensive legal framework. The government then moved to the Court of Appeal to challenge the decision by the High Court but, on January 26, the appellate court upheld the decision.

Ruto has nominated a new finance minister after dismissing all but one member of his cabinet in response to the youth-led violent protests that began last month. The Kenyan leader has stated that higher taxes are essential for the government to fund development programs while managing a substantial public debt that currently exceeds the levels recommended by the International Monetary Fund (IMF) and the World Bank.

The government has submitted a new economic plan to the IMF, with the board expected to review it by the end of August.