Supreme Court to decide fate of Finance Act 2023, Housing Levy

All eyes will be on the Supreme Court on Tuesday as it renders its decision on the government's appeal regarding the legality of the entire Finance Act, 2023.

The seven judges of the apex court, led by Chief Justice Martha Koome, are also expected to rule on the fate of the Housing Levy Act, just days after the High Court in a different case found it to be properly enacted.

This decision follows an appeal filed by the government, including the Attorney General (AG), the Cabinet Secretary for Treasury, the National Assembly, and the Kenya Revenue Authority (KRA), against the Court of Appeal’s judgment declaring the Finance Act 2023 unconstitutional. 

The Court of Appeal's ruling was based on several procedural and constitutional concerns.

The court found that certain sections of the Act, introduced after the public participation phase, failed to meet constitutional requirements for public engagement. 

Appellant judges Kathurima M'inoti, Agnes Murgor, and John Mativo emphasised that significant amendments made post-consultation violated principles of transparency and inclusiveness, which are crucial to Kenya’s legislative process.

In August, the government aggrieved by the appellant court's decision urged the Supreme Court to overturn the ruling against the Finance Act 2023, citing an economic crisis. 

Githu Muigai, representing the AG and the CS for Treasury, told the judges that the Act is vital for the country’s economic stability and that its invalidation could lead to a fiscal crisis. He maintained that the Affordable Housing Levy remains a significant priority for the government.

"The question of how to enact an effective and constitutionally compliant tax statute is not just an academic exercise but a practical necessity for managing the country’s revenue," he stated.

However, Busia Senator Okiya Omtatah, activist Eliud Matindi, and several civil society organisations have rallied the Supreme Court to uphold the Court of Appeal’s decision to declare the Finance Act 2023 unconstitutional.

Other petitioners, including the Law Society of Kenya (LSK), the Azimio la Umoja Coalition, and the Katiba Institute, argue that the Finance Act was flawed and procedurally mishandled, asserting that the appeals against the Court of Appeal's ruling lack merit.

In their submission to the Supreme Court, LSK supported the Court of Appeal’s decision, arguing that the Finance Act 2023 was enacted in violation of constitutional norms.

Through senior counsel Charles Kanjama, society noted that the Act’s passage bypassed critical procedural requirements, including adequate public participation and proper legislative scrutiny.

Omtatah contended that the government failed to engage adequately with those directly impacted by the Act’s provisions, including marginalised and illiterate populations.

"The process did not meet the constitutional requirement for meaningful public participation. Views from those most affected by the amendments were neither solicited nor considered, which is a fundamental flaw in democratic governance," he argued. 

The Senator insisted that the Act’s amendments were enacted without sufficient input from those who would bear the financial implications. 

This oversight, he argued, contravenes the principles of transparency and inclusivity mandated by the Constitution, thereby invalidating the legislative process.

Addressing the issue of mootness, Kanjama focused on the Housing Finance Levy. 

He argued that the Affordable Housing Act had repealed Section 84 of the Finance Act 2023, which had previously been a point of contention.

"With the repeal of the relevant section by the Affordable Housing Act, the specific issue regarding the Housing Levy has become moot," Kanjama explained.

He concluded that the procedural flaws of the Finance Act undermine public trust in the legislative process and set a dangerous precedent if left unaddressed.