Gov't mulls on what next after court declared Finance Act 2023 unconstitutional

All eyes are on the office of the Attorney General on what is next for various government agencies following the nullification of the Finance Act 2023 by the Court of Appeal.

Sources at the National Treasury and the Energy and Petroleum Regulatory Authority told Citizen TV that they were waiting for direction on whether to effect the consequential judgment or wait for an appeal at the Supreme Court.

The court of appeal decision affected major taxes including tax on high cadre salaries, VAT on petroleum products and several consumption taxes.

Parliament is said to be reviewing the judgment for a possible appeal at the Supreme Court.

The ruling by the Court of Appeal declaring the Finance Act 2023 unconstitutional has left the government without a current finance act to regulate taxation, especially following the president's rejection of the Finance Bill 2024 in its entirety.

This decision represents another setback for President William Ruto's administration, throwing into confusion the legal framework governing taxation and public finance. The ruling raises significant questions about the government's next steps in addressing this complex legal and fiscal situation.

Sources also say that there are plans to appeal the Court of Appeals's decision to the Supreme Court through the office of the attorney general.

Sources within the EPRA have also intimated that they are awaiting a green light from the office of the attorney general in order to know the next steps.

Key taxes that could be impacted by this decision include the VAT on petroleum products, which was increased from 8% to 16%. This ruling may provide relief to Kenyans, as the reduction in VAT could lead to lower fuel prices, though consumers remain uncertain about when the court's nullification will take effect.

Additionally, the PAYE tax bands are significantly affected. The now-rejected act had introduced a new tax band of 32.5% for incomes between Ksh.500,000 and Ksh.800,000, and 35% for incomes exceeding Ksh.800,000.

For businesses, the requirement to remit withholding tax within five working days is expected to be rescinded, reverting to the previous schedule of remitting by the 20th of each month.

The 2023 Finance Act faced legal challenges after widespread street protests led by the opposition after President Ruto's government doubled the value-added tax on fuel and introduced a housing tax, making the cost of living unbearable.

The office of the attorney general has yet to provide guidance on the court of appeal's decision, as various government institutions assess the implications of this ruling.