President William Ruto is grappling with the limitations of the Finance Act 2022, the most recent major financial legislation, which cannot help his administration raise additional tax revenue. This Act was finalized during the last days of President Uhuru Kenyatta’s term before the August 2022 General Election.....CLICK HERE TO READ THE FULL ARTICLE>>>
Recently, Ruto’s first Finance Act of 2023 was declared unconstitutional by the Court of Appeal, echoing a previous High Court decision. The government has appealed to the Supreme Court, highlighting a potential loss of Sh164 billion in tax revenues if the Act is nullified.
Additionally, President Ruto had to retract the Finance Bill 2024, intended to generate Sh346 billion through new taxes, due to widespread protests against its severe tax measures that would have increased the cost of living.
Economic experts claim that both the contested Finance Act 2023 and the rejected Finance Bill 2024 included numerous measures recommended by the International Monetary Fund (IMF) to boost tax revenues. Their rejection might strain relations with the IMF and could delay funds from the extended credit facility agreed upon in 2020.
According to Ken Gichinga, Chief Economist of Mentoria Economics, in the event that the Finance Act 2023 is ruled illegal by the Supreme Court and the Finance Bill 2024 is withdrawn, the Finance Act 2022 will serve as a benchmark.
“When a Bill or an Act is either withdrawn or found to be unconstitutional, it means that one has to refer to the previous year and in this case, the Finance Act 2022 will become the benchmark or point of reference for the way forward,” Gichinga said.
One of the better choices available to the government, according to Nikhil Hira of Kody Africa LLP, would be to drastically reduce spending. According to Hira, the government would need to make even more drastic cuts if the Supreme Court upheld the Court of Appeal’s decision.
In an effort to increase money, Hira thinks the government may attempt to change some laws and enact new tax policies in the upcoming months. He noted that in order to avoid upsetting Kenyans, whose protests led to the current situation, the administration would need to proceed gently...CONTINUE READING>>
