Kenya’s 2023 Finance Act, a controversial tax law introduced under President William Ruto’s administration, has faced judicial and public opposition due to the substantial tax increases it mandates. Recently, Kenya’s Supreme Court reinstated the law, overriding a prior ruling from the Court of Appeal that had declared it unconstitutional. This temporary reinstatement allows the government to continue collecting taxes until a full hearing on the matter is conducted.
Background on the 2023 Finance Act
The Finance Act, 2023, introduced significant tax changes, including a 16% VAT on fuel, increased income taxes for high earners, and a mandatory housing levy for all workers. These measures aim to address Kenya’s rising public debt and support development projects but have been met with strong resistance from the public and opposition parties.
Judicial Journey and Supreme Court Ruling
After the law was initially invalidated by the Court of Appeal in July 2024, citing issues with its constitutionality, the Kenyan government appealed the decision. The Supreme Court recently reinstated the act on the grounds of public interest and fiscal stability. This interim ruling allows tax collection to proceed until a comprehensive hearing in September 2024.
The Government’s Perspective
The Ruto administration argues that these taxes are necessary for sustainable economic development and debt reduction. The government also faces international pressure, as Kenya’s compliance with the act’s financial goals is a condition for continued support from the International Monetary Fund (IMF), which is set to review Kenya’s eligibility for additional funding in light of its economic reforms.
Opposition and Public Response
Public protests against the Finance Act in mid-2023 highlighted widespread concerns over the increased cost of living, exacerbated by the fuel tax and housing levy. Civil society groups and opposition leaders argue that these policies disproportionately affect low-income earners, making daily life more expensive for millions of Kenyans.
What’s Next for the Finance Act?
The Supreme Court’s decision is a temporary one, and a consolidated appeal is scheduled for a full hearing in September. This upcoming decision will determine whether the act will remain in force or be invalidated, shaping the future of Kenya’s tax policy and economic reforms.
Kenya’s Finance Act, 2023, is at the centre of a high-stakes legal battle. While the government views the act as essential for economic stability, the public and opposition express concerns about its impact on the cost of living. As the Supreme Court prepares for a full hearing, the act’s future remains uncertain, making this case a defining moment for Kenya’s fiscal and legal landscape.
