• Justice Mugure Thande said the state had not demonstrated to her satisfaction grounds to warrant the setting aside of the orders of June 30.
• Last week, the state had pleaded with the court to lift the orders saying there is bound to be a crisis at the National Treasury.
Image: DOUGLAS OKIDDY
President William Ruto's administration on Monday suffered a huge blow that could stall all government plans after the High Court declined to lift orders staying the implementation of the Finance Act.
The court decision means the Finance Act 2023, which was assented to by the President on June 26 remains an impotent law.
The government had hoped to raise more revenues to fund its Sh3.6 trillion budget but the new tax measures may not be realised after High Court judge Mugure Thande declined to lift her orders that suspended the implementation of the new taxes.
Busia Senator Okiya Omtatah and six other petitioners including the Law Society of Kenya had moved to court to have the new law declared unconstitutional arguing that the Finance Act 2023 was illegal as the bill did not pass through the Senate as envisioned by the law.
On June 30, Justice Thande issued conservatory orders staying the implementation of the Act pending further directions.
Last week, the state had pleaded with the court to lift the orders saying there is bound to be a crisis at the National Treasury.
Yesterday, the judge in her ruling said the state had not demonstrated to her satisfaction grounds to warrant the setting aside of the orders of June 30.
“The petitioners had raised several grounds on which they claimed that the Finance Act is unconstitutional and my view is that were the court to set aside conservatory orders, the petition will be rendered a mere academic exercise,” Thande ruled.
The court did not stop there.
Thande certified the matter as one that raised a substantial question of law and thereby transmitted the file to the Chief Justice to assign a bench of not less than three judges to hear and determine the petition.
That will be a tedious process that could completely throw the Finance Act into oblivion.
A lawyer who spoke to the Star on the implications of the decision said President Ruto's administration was left with the option of either drafting a new finance bill or pursuing the matter to its conclusion which might take years.
He cited the Building Bridges Initiative case which took three and half years in court to be settled.
Even if the matter was to be concluded at the High Court, it would still take months before the decision is made.
For instance, the case challenging the President's appointment of 50 Chief Administrative Secretaries was filed in March and a judgment delivered four months later.
The Finance Act is often in operation for a year but its suspension means the government must now rely on the old law until a determination is made.
This means Ruto's government will have to wait to start collecting the 1.5 per cent housing tax which was to create funds for his affordable housing programme.
The state can also not implement the Pay As You Earn increment to 32.5 per cent for salaried workers earning above Sh500,000. The plan to also increase PAYE for those earning over Sh1 million has also been stayed.
However, more focus is on the increment of VAT on fuel and petroleum products which was increased from eight to 16 per cent.
Already, the Energy and Petroleum Regulatory Authority went ahead and increased pump prices by over Sh12 based on the new law which has since been stayed.
Omtatah has asked the court to find EPRA bosses in contempt of its orders and commit them to civil jail.
"Once a court has issued stay orders, it means there is no law. What EPRA did was in contempt of court and they risk being jailed if that matter is pursued," another lawyer told the Star.
Thande in her ruling said the court was enjoined to protect the supremacy of the Constitution and noted that the presumption of a constitutionality is not a finding of constitutionality.
“I have considered all the issues raised by the petitioners concerning the Finance Act and implementation and I am keenly aware that I cannot at this state delve into the merits of the case as it must await the full hearing of the petition,” she said.
“I further find that the prejudice complained of is the loss of taxes has to be balanced with the legal requirement that all taxes must be grounded on the law,” she ruled.
The court said it was satisfied that notwithstanding the presumption of constitutionality of legislation there was merit in granting of conservatory orders.
“I have no difficulty in finding that the petitioners have established a prema facie case with a probability of success and if the substratum of the petition is not preserved by having in place conservatory orders there is imminent danger of rendering the petition nugatory and a mere academic exercise,” the court ruled.
The judge held that the prejudice that will be suffered by the petitioners and the public by being subjected to a law that may ultimately be determined to be unconstitutional far outweighs the prejudice to be suffered by the state if the petition was to fail.
While the petitioners argued the bill did not pass through the Senate as is required by law, the state argued that they (petitioners) failed to disclose of the correspondence exchanged between the speakers of both the National Assembly and the Senate regarding the consideration of the Finance Bill 2023.
Their case was that the letter relied on by the petitioners to show that there was no concurrence between the two Houses of Parliament was illegally obtained.
The state further argued that the issue of concurrence by the two speakers on which the application had been anchored had been resolved.
As such, it urged the court to set aside the orders it had issued suspending implementation of the Finance Act.
However, Justice Thande in her ruling said the issue raised that the letter was obtained illegally is a matter that will be interrogated at the hearing of the petition and the court cannot at this stage delve into it.