Kenya’s tax authorities can continue to collect a series of taxes introduced last year until the hearing of the consolidated petition in the Supreme Court, Bloomberg reported. The Supreme Court issued a preservation order suspending the Court of Appeal’s July 31 ruling that the 2023 Finance Bill was unconstitutional. The Supreme Court will hear the consolidated appeal on September 10 and 11.
Last year, Kenya implemented a tax bill that doubled the value-added tax on fuel, increased excise taxes on money transfer services and increased the top payroll tax rate from 30% to 35%. The seven-judge bench of the Supreme Court, including Chief Justice Martha Koome, said the "public interest favors the granting of a preservation and stay order" to maintain stability in the budget and appropriations process until the outcome of the appeal is determined.
The implementation of the tax law triggered 11 High Court petitions, mainly questioning the constitutionality of the legislation process and some of its provisions. The government was forced to abandon a separate tax law that sought to introduce more measures, which led to deadly street protests.
Chris Kiptoo, permanent secretary at the finance ministry, said scrapping the tax, introduced last year, would reduce government revenue by about 214 billion shillings ($1.66 billion), meaning a revised budget would be needed to cut spending. The president faces a fiscal year in which the national treasury sought record revenues since taking office two years ago but had to scale back spending plans by 3 percent after protests left at least 61 people dead.
Two ratings agencies have downgraded Kenya over uncertainty about its ability to diversify revenue sources. Further delays could lead to a surge in liabilities from unpaid contractors, suppliers and pension funds. BancTrust & Co. investment bank said the tax removal increases "uncertainty about revenue expectations" and could lead to a larger budget deficit. Kenya's financing gap is expected to be 5.8% of gross domestic product in the current fiscal year as proposed spending cuts face implementation risks.
