Case Update: Supreme Court Petition No. E31 of 2024

The Cabinet Secretary for the National Treasury and Planning & 4 Others V Okiya Okoiti Omtata & 52 others (2024) eKLR

In Summary: The Finance Act 2023 is valid and constitutional to the extent of the tax provisions therein.

BACKGROUND

1. Every financial year, Parliament engages in legislative processes that involve amending existing statutes to introduce new fiscal policies, improve revenue collection and meet national budgetary requirements of the next financial year. 
2. The President  assented to the Finance Bill 2023 on 26^th June 2023. The Act was subsequently gazetted on 27^th June 2023. While a majority of changes were to take effect as from July 2023, a few others were to take effect after 1^st September 2023 and the rest on 1^st January 2024.
3. various stakeholders challenged the constitutionality of the Act through petitions to the  High Court. The High Court held various sections of the Act unconstitutional, notably introduction of the Housing Levy. The decision of the High Court elicited Appeals to the Court of Appeal. The Court of Appeal found the process leading to enactment of the Finance Bill 2023 fundamentally flawed and declared the whole Bill void ab initio.
4. Consequently, the Appellants and Cross-Appellants challenged  the decision of the Court of Appeal at the Supreme Court. The Supreme Court pronounced itself on the matter on 29^th October 2024.
5. The Supreme Court addressed various issues including;
   • Whether the Bill was subjected to concurrence process,  as provided by Article 110(3) of the Constitution?
   • Whether it was necessary for parliament to conduct fresh Public Participation for new amendments to the Bill after the initial Public Participation? 
   • Whether it was a requirement for parliament to provide reasons for accepting or rejecting views from stakeholders during Public Participation? 
   • Whether the question on the validity of the clause introducing Affordable Housing Levy was moot?

DECISION OF THE SUPREME COURT

6. The Supreme Court found as follows, among others:
   • That sufficient Public Participation had been conducted in accordance with the provisions of the Constitution (2010).
   • Parliament was required to give reasons as to why it accepted or rejected views collected in Public Participation and whereas it was desirable for Parliament to give reasons, there was no express Constitutional provision that mandated it to provide reasons for accepting or rejecting public views.
   • There was no live controversy on the question of the Affordable Housing levy and the issue was moot before the Supreme Court. 
   • The sections amending Section 7 of Kenya Roads Act, 1999 and section 28 of the Unclaimed Financial Assets Acts, 2011 were unconstitutional having been wrongly included in a Money Bill.  

AUTHORITIES REFERRED TO

7. The Supreme Court referred to the following Statutes:
   • Articles 10, 47(2), 109,118(2), 201,206 and 210 of the Constitution of Kenya 2010
   • Section 7 of Kenya Roads Act, 1999
   • Unclaimed Financial Assets Act, 2011
   • Affordable Housing Bill, 2024Public Finance Management Act, 2012
8. The Supreme Court referred to the following cases:
   • British American Tobacco Kenya, PLC vs. Cabinet Secretary for the Ministry of Health & 2 Others (Petition No. 5 of 2017) eKLR (BAT Case)
   • In the Matter of the National Land Commission (Advisory Opinion Application 2 of 2014) [2015] KESC 3 (KLR)
   • Law Society of Kenya vs. Attorney General & Another, HC Petition No. 3 of 2016; [2016] eKLR
   • Ethics and Anti-Corruption Commission & Another vs. Tom Ojienda & 2 Others (Petition 30 & 31 of [2019] (Consolidated)) [2022] KESC 59.
   • Institute for Social Accountability & Another vs. National Assembly & 3 0thers (Petition 1 of 2018) [2022] KESC 39 (KLR)
   • Limpopo Province vs. Speaker of the Limpopo Provincial Legislature and Others, (CCT 94/10); [2012] ZACC 3; 2012 (4) SA 58 (CC); 2012 

IMPLICATIONS

9. The Supreme Court effectively held that the Finance Act 2023 was valid and constitutional insofar  as it related to amendments of the tax laws. This means that the tax provisions of the Finance Act 2023 are valid and enforceable by the Kenya Revenue Authority. 
10. The Supreme Court decision however ignited debate on key constitutional concepts such as separation of powers between the branches of government, what amounts to sufficient Public Participation, appropriate remedies in case laws are found to be unconstitutional, among others.

This Case Update is provided for information purposes only and does not substitute legal or tax advice. Should you require professional advice on matters covered by this Case Update, please get in touch with us.

© East African Tax Consulting, 2024