The Supreme Court of Kenya overturned the Court of Appeal’s ruling that declared the Finance Act 2023 unconstitutional.
The apex court on Tuesday ruled that the Finance Act 2023 is constitutional, upholding the government’s position on the matter.
“The preliminary objection on this Court’s jurisdiction is overruled. We hereby set aside the Court of Appeal’s finding declaring the entire Finance Act, 2023, unconstitutional,” said the Supreme Court.
The decision confirms the legality of the Finance Act 2023 and allows the government to continue revenue collection and fiscal operations under its legislative framework.
“The Consideration of the Finance Bill (National Assembly Bill No. 14 of 2023)’ met the threshold of a reasonable measure for considering proposals, views and suggestions from the public, with respect to the public participation exercise conducted on the Finance Bill, 2023. m),” the court ruled.
“In line with Article 221 (6) of the Constitution, Estimates of Revenue are not a component of the Appropriations Act. The preparation and tabling of the estimates of revenue and expenditure precede the preparation and tabling of the Appropriation Bill. The Estimates of Revenue and expenditure for the FY 2023/2024 were tabled and considered before the National Assembly as required by law.”
“Bearing in mind the time-sensitive nature of a Finance Bill, it is unreasonable to require, or subject amendments intended to give effect to proposals and suggestions from a public participation exercise to another fresh round of public participation.
This comes as a relief to the government, which had faced significant public backlash and protests against the Act.
Key changes in the Finance Act 2023
Income Tax:
- Reduced corporate tax rate for non-residents with a permanent establishment to 30%.
- Introduced a 3% tax on cryptocurrency transactions.
- Increased tax on high-income earners.
- Introduced withholding tax on various services.
VAT:
- Reduced VAT on petroleum products to the standard rate.
- Zero-rated LPG and certain other goods.
- Introduced VAT on imported digital services.
Excise Duty:
- Increased excise duty on various imported goods.
- Reduced excise duty on telecommunications services.
- Increased excise duty on betting and gaming.
- Introduced excise duty on imported fish and sugar.
Other Changes:
- Reduced IDF and RDL rates.
- Introduced a new export and investment promotion levy.
- Expanded exemptions from IDF and RDL.
- Introduced amnesty on interest and penalties for tax arrears.
- Tightened tax compliance measures.
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