- Through Senior Counsel Prof Githu Muigai and counsels Kiragu Kimani, Mahat Somane, and Paul Nyamodi, the CS Treasury and Attorney General highlighted in great detail the consequences of invalidating the Act.
- The counsels reiterated that the purpose of the government is to deliver services to its citizens, but in the absence of legislation, the same is inhibited.
Image: JUDICIARY
The government has pleaded with the Supreme Court to overturn a decision that nullified the entire Finance Act 2023, saying it has hurt service delivery.
Through Senior Counsel Prof Githu Muigai and counsels Kiragu Kimani, Mahat Somane, and Paul Nyamodi, the CS Treasury and Attorney General highlighted in great detail the consequences of invalidating the Act.
Among them are default on debts for lack of adequate revenue, suspension of government projects, and inability to pay remunerated officers, including judges and members of independent commissions.
The counsels reiterated that the purpose of the government is to deliver services to its citizens, but in the absence of legislation, the same is inhibited.
They cited an affidavit by former CS Treasury Njuguna Ndung'u, which indicated that the government stood to lose Sh211 billion as a consequence of the invalidation of the Finance Act 2013. These monies, he said, cannot be recovered from taxpayers.
"Failure to raise adequate revenue by the government through taxation could potentially result in a default of government debts. This would have immediate negative harm on the sovereign debt rating for Kenya," Githu said.
He explained that a deteriorating sovereign debt rating would increase the cost of borrowing (for international private and public debt), further raising the cost of servicing foreign debt.
Nyamodi told the Supreme Court judges that some of the services the government would not be able to provide as a result of the Sh211 billion shortfall are loans for Helb amounting to Sh10 billion, a free primary education (Sh4 billion) critical illness fund, and delivery on pension.
But in the event the judges find there were flaws with the challenged Finance Act and agree with the finding of the Court of Appeal that invalidated the entire Act, the government urged the court to consider crafting orders that will enable them to continue delivering services to the public.
Such orders would allow them to rectify any violations made in the next cycle of amendments to the act.
Kenya Export Floriculture, Horticulture, and Allied Workers Union also made a similar proposal.
Through advocate David Omula, the union said nullification of the act has resulted in significant adverse consequences.
"Everybody employed by the state is now agitating for a pay hike. We also have a shortage of medical staff and teachers and payment of debts that are eating up our revenues up to 70 per cent," he said.
He said in the absence of the rejected Finance Act, the only act that can raise additional revenue and address the socioeconomic challenges is the act that's before the court.
"For us to come out of this problem of shortage of finances, the court needs to craft an order that will see to it that revenue is realised to address current challenges," he said.
He also asked the judges to strike a balance and save the good provisions in the act that are in the public interest, like inputs of raw materials for pharmaceuticals, which are now zero-rated.
The Supreme Court began hearing the appeal filed by the CS and AG today. The session commenced at 9 am and ceased at 4 pm with parties scheduled to resume to court tomorrow for a further hearing.
The hearing comes after the Supreme Court temporarily suspended the Court of Appeal decision that invalidated the Act pending determination of the appeal.
The appellate court's declaration threatened to deny the national Treasury more revenue, barely months after the government lost a provisional Sh346 billion after month-long countrywide protests led to the rejection of the Finance Bill 2024 in July.
The National Assembly and Speaker of the National Assembly, as represented by advocate Issa Mansour, further addressed the issue of public participation, saying it was adhered to.
He faulted the appellate court for not considering the outcome of the public participation, saying more than 1,000 memoranda were submitted to the National Assembly and 300 representations were made.
The assembly, he said, considered all memos item by item. Some of the proposals made by the public were accepted and others rejected.
He said the Court of Appeal was under a duty to consider how many of these proposals were considered and others rejected.
He submitted that the Act cannot be nullified because parliament failed to give reasons for adopting or rejecting any proposals received from members of the public during the public participation process.
He maintained that parliament was not obligated to give reasons for rejecting or adopting, as there's no such requirement.
Kenya Revenue Authority (KRA), on the other hand, led by advocate Gaya Ochieng, said the decision by the appellate court has far-reaching economic consequences and that a blanket declaration of unconstitutionality was excessive
KRA said the Finance Act encompasses unique elements as systems were deployed to ensure tax compliance. " A good example was the etims employed to ensure accuracy and combat fraud," said the Authority.
Hearing resumes tomorrow