Kenya’s Court of Appeal has delivered a major setback to President William Ruto’s government by declaring the 2023 finance law unconstitutional. The ruling, announced on Wednesday, follows a period of intense political turmoil and violent protests sparked by the government’s attempts to raise revenue through tax hikes and new levies. The finance bills, presented to parliament at the beginning of each fiscal year, are the government’s primary tool for setting revenue-generating measures. The 2023 version faced fierce opposition, leading to protests that turned violent, with citizens objecting to measures such as the doubling of value-added tax on fuel, the introduction of a housing tax, and an increase in the top personal income tax rate.
The Court of Appeal’s ruling stemmed from an appeal against a High Court decision from late last year that largely upheld the finance bill, striking out only the housing levy. The government subsequently enacted a new law to allow the collection of the housing tax, which is also being challenged in court.
The ruling creates a significant obstacle for the government, which has been relying on the 2023 finance law to collect taxes following the withdrawal of this year’s bill. President Ruto’s administration has not yet issued a statement on the court’s verdict but retains the option of appealing the decision to the Supreme Court, Kenya’s highest court.
Ruto, who recently dismissed all ministers except one in response to the widespread protests, has nominated a new finance minister. He has argued that the higher taxes are essential for funding development programs and addressing the country’s substantial public debt load, which surpasses the levels recommended by the International Monetary Fund and the World Bank.
Despite the legal challenges, the government has submitted a new economic plan to the IMF and anticipates its review by the IMF board at the end of August. The court’s ruling adds another layer of complexity to Kenya’s political and economic landscape, as the government navigates the fallout from the controversial finance law and seeks to address the country’s fiscal challenges.
