The Court of Appeal has overturned an order made last month suspending the implementation of the 2023 Finance Act after Treasury CS Prof Njuguna Ndung'u argued that the government was losing half a billion shillings a day as a result of the freeze.
A three-judge bench of the Court of Appeal lifted the suspension placed on 30 June, pending the determination of an appeal filed by Prof Ndung'u.
The CS moved to the Court of Appeal through Attorney-General Justin Muturi, arguing that the government would lose about Sh211 billion in the current financial year.
Prof Ndung'u said the freeze will make it difficult for the Kenya Kwanza administration to implement the 2023/24 budget as planned and some projects will have to be suspended if the government is not allowed to raise revenue as proposed in the bill.
Justices Mohammed Warsame, Kathurima M'Inoti and Hellen Omondi ruled that the Finance Bill has a life of 90 days, after which the next budget cycle will be set in motion.
"We have no doubt that the Finance Act and the Appropriation Act are interdependent. While the former provides for the generation of resources, the latter provides for expenditure. There can be no expenditure where the mode of generation of funds has not been provided for," the judges said.
The judges said Prof Ndung'u had estimated that Sh211 billion would be generated at an average daily rate of Sh500 million.
"Although the actual figures are disputed, it is certain that revenue was to be collected with the operationalisation of the Act," the judges said.
Prof Ndung'u said in an affidavit, "Since there are no savings provisions in the Finance Act, 2023, the repealed provisions of the Finance Act, 2022, have the effect of affecting revenue collection, resulting in disruption of services for already budgeted revenue."
In the ruling, the three judges said taxation is a continuous and annual mechanism and members of the public can get a refund of overpaid taxes and levies in subsequent tax payments.
Secondly, the judges said that since the petitions challenged both the entire law and the specific provisions, the court could consider suspending the specific provisions whose implementation has an irreversible effect and cannot be refunded.
"This is in contrast to a blanket suspension of the law. Thirdly, the Appropriation Act, which was enacted on the back of the Finance Act, is in force and is not under constitutional challenge. Finally, had the trial judge considered the substantial and irreversible public interest in the matter, the court would have hesitated to suspend the entire Act," the judges said.
