Double misfortune for the Kenyan president's tax plans

By Basillioh Rukanga, NAIROBI  Kenya 

Kenya’s President William Ruto must be feeling punch-drunk - after suffering another blow to his plans to raise taxes for his cash-strapped, debt-burdened government.

After the recent widespread anti-tax protests - that saw parliament set alight - he bowed to public pressure and withdrew his finance bill for the coming year.

But then last week the appeals court torpedoed his tax plans from last year.

Three judges unanimously ruled the 2023 legislation that had raised taxes on salaries, fuel and mobile money transactions was "fundamentally flawed” and "unconstitutional” as it had not followed laid down procedures.

Both moves pose challenges for government’s ability to raise extra cash to fund the national budget and service its $78bn (£61.4bn) public debt.

Ndindi Nyoro, the chairman of the parliamentary budget committee, told our reporter the latest ruling might cause significant shortfalls in this year’s budget and limited the government’s ability to run its affairs.

“If you look at both finance acts that have now fallen, cumulatively, we’re talking of over half a trillion shillings [$3.8bn] in lost revenue,” Mr Nyoro said.

The government presents a finance bill to parliament before the beginning of each financial year in July, introducing new taxes or changing existing ones, primarily to raise more money.

Around the same time the government also presents what is known as an appropriations bill - this shows how the revenues will be allocated and spent across government departments.

The chaos of the government’s finances was illustrated when this year’s appropriations bill was signed into law as the corresponding finance bill to fund the spending plan was withdrawn.

With the government's tax plans for two consecutive years effectively derailed, analysts say spending may have to be aligned with the finance legislation from 2022.

Economist Odhiambo Ramogi says the latest court decision also creates uncertainly for taxpayers, although the court ruled that taxes already collected cannot be refunded.

The government has appealed against the ruling in the Supreme Court, the country's top court - and asked for the lower court’s decision to be suspended until its appeal is heard.

It argued that it was not feasible to immediately reconfigure systems to the 2022 legislation, and the situation might lead to a paralysis of some government services.

The Supreme Court refused but agreed it was an urgent matter and that the case would be heard this month - even though it is usually on recess in August.