Ever since the Finance Bill, 2024, was withdrawn following nationwide protests in June, President William Ruto’s administration has been relying on the Finance Act, 2023, to generate revenue through taxes to fund its operations and major projects. This plan was jeopardised when the Court of Appeal declared the entire Finance Act unconstitutional, on the basis that the legislative process that led to its enactment was fundamentally flawed and in violation of the Constitution.
The Finance Act established measures for the government to raise revenue, including widening the tax band and introducing new levies to boost the country’s financial resources.
A full bench of the Supreme Court has now declared that the Court of Appeal erred in invalidating the Finance Act, since their findings failed to balance against the government’s constitutional mandate to facilitate and realise a strong and acceptable fiscal outlook for the economy.
“We find that the legislative process leading to the enactment of the Finance Act, 2023, was in accordance with the constitutional edicts. We hereby set aside the Court of Appeal’s finding declaring the entire Finance Act, 2023, unconstitutional,” the judges ruled.
Among the reasons cited by the Court of Appeal for quashing the Act were that the National Assembly failed to seek concurrence of the Senate before passage of the Bill, and a lack of adequate public participation on new clauses added during debate in Parliament.
However, Chief Justice Martha Koome alongside Judges Philomena Mwilu, Mohamed Ibrahim, Smokin Wanjala, Njoki Ndgungu, Isaac Lenaola and William Ouko found that the Bill underwent the concurrence process between the two speakers of Parliament and did not require consideration by the Senate.
“The Bill was subjected to public participation which was adequate and satisfactory taking into account the circumstances of enacting a Finance Act. To that extent, we find there was no basis to declare the entire Act unconstitutional,” they ruled.
According to the judges, the National Assembly’s Departmental Committee on Finance and National Planning 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.
They ruled that there is no express obligation on Parliament to provide reasons for accepting or rejecting proposals made during a public participation exercise and that courts should be sensitive to the need to ensure that undue burden is not imposed on duty bearers for actions taken.
“We hold that Parliament complied with the duty to promote transparency and accountability in how it dealt with proposals, suggestions, views and input from the public participation exercise on the Finance Act. They did not violate the Constitution in the consideration and approval of the Act,” ruled the judges.
In the judges’ view, courts should refrain from intervening in policy matters given that the taxation measures contained in the Act were an exercise of executive policy formulation by the government to meet the economic policy and planning needs.