Supreme Court to rule on order lifting Finance Act freeze
Taxpayers will on Friday know whether the Finance Act will once again be suspended pending the hearing and determination of a case filed by Busia Senator Okiya Omtata
The Supreme Court will deliver a ruling regarding an application seeking to set aside orders that reinstated the Finance Act, of 2023.
In a notice seen by the Star, the top court says the ruling will be delivered by 10 a.m.
“Take notice that the ruling will be made via email on September 8 via email,” the court said.
In July, the Court of Appeal lifted an order blocking the implementation of the law, which among other things doubled the Value Added Tax (VAT) on petroleum products to 16 percent and introduced a housing levy of 1.5 percent.
The law also hiked income tax for top earners, with those with a gross salary of above Sh500,000 slashed 32.5 percent while those with Sh800,000 and above cut 35 percent from a standard rate of 30 percent.
The law did away with the VAT on Liquefied Petroleum Gas (LPG).
Omtatah and six others are challenging the new tax measures arguing that the failure to present it to the Senate violated section 40(3) of the Public Finance Management Act, 2012.
They insist that the Court of Appeal ignored the spirit and letter of the Public Finance Management Act, which provides that the Cabinet Secretary shall submit to Parliament the Finance Bill, both lower and upper house.
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Omtatah holds that under Article 110 (3) of the Constitution, it is mandatory that before the Bill can be introduced for consideration in the originating House, a Speaker of one House of Parliament must first seek the concurrence of the Speaker of the other House as to whether the Bill in issue concerns counties.
However, both the High Court and Court of Appeal argued that government operations would grind to a halt due to the freeze on the collection of some taxes.
The government is targeting at least Sh211 billion from the tax measures to fill a deficit in the Sh3.6 trillion budget.
The government argued that the freeze would make it difficult for the Kenya Kwanza administration to implement the 2023/24 budget as planned.
The three-judge bench ruled that the Finance Act has a life span of 90 days beyond which the next budgetary cycle is set in motion.
“We do not doubt in our mind that the Finance Act and the Appropriation Act are interdependent. While the former provides for the generation of the funds, the latter provides for the expenditure,” the judges said.
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While taxpayers are hopeful that the top court will rule in their favor, law and finance experts are pessimistic.
Tax law expert James Omweri says that most of the tax measures in the Finance Act are already operational and wonders what will happen if the court dismisses it.
“I don’t think the Supreme Court will have a different ruling from the High and Court of Appeal. Most contested matters have been overtaken by events,” Omweri said.
Hellen Kasaya another tax expert, terms today’s ruling as a mere formality, considering that the second round of taxes in the act came into effect early this month while others like doubling of VAT were instant.
Daniel Rege, a government tax consultant on the other hand insists that although the three arms of government work independently, they come to a consensus on some matters likely to hold state business.
“The Finance Act is one of those matters as it outlines how the government is going to raise funds. A contrary ruling will be kin to sabotage,” Rege told the Star on the phone.
Supreme Court to rule on order lifting Finance Act freeze
