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The Court of Appeal Wednesday declared the Finance Act 2023 unconstitutional, citing procedural flaws in its enactment process. Justices Kathurima M’inoti, Agnes Murgor, and John Mativo found that several sections introduced after public participation were not subjected to renewed public scrutiny, violating constitutional requirements.
The contentious Act had sparked 11 constitutional petitions, heard collectively by a three-judge bench led by the late Justice David Majanja. The bench ultimately struck down several sections of the Act, including the controversial housing levy. They ruled that section 84, which amended the Employment Act to introduce the housing levy, discriminated between formal and informal sectors, thereby violating taxation principles.
However, the court upheld the 16 percent VAT on insurance premiums, the digital asset tax, and the tax on betting, affirming their constitutionality and alignment with the National Assembly’s mandate.
The government, dissatisfied with the initial ruling, appealed the decision. The Court of Appeal, in its judgment, addressed the housing levy issue, noting that the Affordable Housing Act 2024 had rendered the controversy moot. “Given the enactment of the Affordable Housing Act, 2024, we find no live controversy requiring our determination regarding the unconstitutionality of section 84,” the judges stated.
The Court of Appeal also emphasized Parliament’s constitutional obligation to provide reasons for adopting or rejecting public proposals during the participation process. The failure to adhere to this requirement, they ruled, invalidated the entire Finance Act 2023.
The judges further pointed out that the constitution was breached when the appropriation Bill/Act was approved before the budget proposal had been presented by the Treasury Cabinet Secretary in the National Assembly.
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