The Court of Appeal has lifted a suspension order that was issued last month, which had halted the implementation of the Finance Act 2023. The decision to lift the suspension came after Treasury CS Prof Njuguna Ndung’u presented his argument that the government was losing half-a-billion shillings daily due to the freeze.
A panel of three judges at the appellate court made this decision, pending the resolution of an appeal filed by Prof Ndung’u. The CS approached the appellate court through Attorney General Justin Muturi, stating that the government stood to lose approximately Sh211 billion during the current financial year if the freeze continued.
Prof Ndung’u expressed concern that the freeze would make it challenging for the Kenya Kwanza administration to carry out the 2023/24 budget as planned. Some projects would need to be suspended if the government couldn’t generate revenue as proposed in the Bill.
The three judges, namely Justices Mohammed Warsame, Kathurima M’Inoti, and Hellen Omondi, ruled that the Finance Act has a 90-day life span, beyond which the next budget cycle begins. They emphasized the interdependence of the Finance Act and the Appropriation Act, where the former facilitates revenue generation, and the latter deals with expenditure. Without the means to generate funds, expenditure on budgeted items would not be possible.
The judges acknowledged that Prof Ndung’u had estimated revenue generation of Sh211 billion at an average daily rate of Sh500 million. Though the actual figures were disputed, it was evident that revenue collection was expected with the activation of the Act.
Prof Ndung’u urged the court to lift the order, which had been extended by the High Court on July 10, as the government had to resort to borrowing to fill the revenue gap for its operations. He argued that the absence of saving provisions in the Finance Act 2023, coupled with the repeal of certain provisions of the Finance Act 2022, affected revenue collection and disrupted services that had already been budgeted.
In their ruling, the judges emphasized that tax is a continuous and annual mechanism. Overpaid taxes and levies can be refunded to the public when making subsequent tax payments. They also stated that the court had the option to suspend specific provisions of the Act with irreversible effects, rather than imposing a blanket suspension.
Furthermore, the Appropriation Act, enacted in the context of the Finance Act, remained in place and was not under constitutional challenge. The judges asserted that considering the substantial and irreversible public interest in the matter, the trial judge would have been hesitant to suspend the entire Act had they taken it into account.
