The Court of Appeal in Kenya has reversed a decision made last month suspending the implementation of the 2023 Finance Act after Treasury CS Prof. Njuguna Ndung’u claimed the government was losing half a billion shillings per day as a result of the freeze.
A three-judge bench of the Court of Appeal lifted the suspension imposed on June 30, pending the outcome of Prof. Ndung’u’s appeal.
The CS filed an appeal with the Court of Appeal through Attorney General Justin Muturi, claiming that the government will lose Sh211 billion in the current fiscal year.
Prof. Ndung’u stated that the freeze will make it difficult for the Kenya Kwanza administration to implement the budget for 2023/24 as planned, and that some projects will have to be halted if the government is not allowed to raise revenue as proposed in the bill.
The Finance act has a 90-day life, according to Justices Mohammed Warsame, Kathurima M’Inoti, and Hellen Omondi, after which the next budget cycle will begin.
“There is no doubt that the Finance Act and the Appropriations Act are inextricably linked.” While the former is concerned with resource generation, the latter is concerned with resource expenditure. “There can be no expenditure if the method of generating funds is not provided for,” the judges ruled.
According to the judges, Prof. Ndung’u estimated that Sh211 billion would be generated at a daily rate of Sh500 million.
“Although the exact figures are disputed, it is certain that revenue was to be collected with the Act’s implementation,” the judges wrote.
Prof. Ndung’u had asked the court to overturn the order, which had been extended by the High Court on July 10, claiming that the government needed to borrow to bridge the gap in order to function.
“Since there are no savings provisions in the Finance Act, 2023, the repealed provisions of the Finance Act, 2022, have the effect of affecting revenue collection, resulting in disruption of services for already budgeted revenue,” Prof. Ndung’u stated in an affidavit.
The three judges stated in their decision that taxation is a continuous and annual mechanism, and that members of the public can receive a refund of overpaid taxes and levies in subsequent tax payments.
Secondly, the judges stated that because both the entire law and the specific provisions were being contested in the petitions, the court could consider suspending the specific provisions whose implementation would have an irrevocable impact and could not be undone.
“This is in contrast to a blanket suspension of the law. Thirdly, the Appropriation Act, which was enacted on the back of the Finance Act, is in force and is not under constitutional challenge. Finally, had the trial judge considered the substantial and irreversible public interest in the matter, the court would have hesitated to suspend the entire Act,” the judges said.