Title: Kenya: High Court of Justice declares part of 2023 finance law unconstitutional
Introduction:
In Kenya, the Nairobi High Court handed down an important judgment on November 28, 2023, declaring part of the 2023 Finance Act unconstitutional. This decision follows a challenge led by the opposition and civil society, who criticize notably the discrimination of certain income taxes. In this article, we will take a closer look at the implications of this decision and the reactions to it.
Taxes deemed discriminatory:
The 2023 finance law, promulgated at the end of June, aimed to increase state revenue through new taxes. However, some of these taxes have been described as discriminatory by the High Court of Justice. These include the housing levy, a tax on income intended to finance moderately priced housing. The judges ruled that this tax should only apply to workers in the formal sector, which constitutes discrimination against informal workers.
A mixed victory for the civil parties:
Civil society organizations and political parties who had filed a complaint against the 2023 finance law obtained a mixed victory. While they would have liked the entire law to be declared unconstitutional, the court only upheld certain discriminatory taxes. Despite this, this victory is still significant and is seen as a step in the right direction by the plaintiffs.
Tax refund:
A crucial issue that now arises is the reimbursement of taxes collected since the 2023 Finance Act took effect. Lawyers for the plaintiffs are calling for these taxes to be refunded, while lawyers for Parliament and the Kenya Office of Revenue requests a 45-day suspension of the judgment to allow the tax services to adjust. Another concern is related to state finances, because according to lawyers, the Treasury would not be able to reimburse these taxes.
Conclusion:
The decision by the High Court of Justice to declare part of Kenya’s Finance Act 2023 unconstitutional is a significant development that highlights concerns over tax discrimination. This decision offers a glimmer of hope to civil society organizations and political parties who continue to fight for greater tax fairness in the country. The case also raises important questions about the reimbursement of taxes already collected and the necessary adjustments to the tax authorities. Time will tell how these issues will be resolved and what the long-term consequences of this decision will be on tax policies in Kenya.