After President William Ruto assented to the Finance Bill, 2023, on June 6, the bill became law. This meant that some of the provisions of the law were to take immediate effect from July 1, 2023, while some would become effective in September and others in January 2024. 

Provisions such as the Affordable Housing Levy and the increase of VAT on fuel are among the provisions that were to take immediate effect. The Finance Act, 2023 (the Act) was no different from the previous Finance Acts challenged in court. However, this was the first time that the courts granted suspension orders.

Seven petitioners went to court challenging the implementation of the Act among them Busia County Senator Okiya Omtatah. The petition sought a determination of the role of the Senate in legislation affecting counties and procedures under the Public Finance Management Act among other issues. Additionally, the petitioners pending the determination of the petition, sought interim orders which included conservatory orders suspending implementation of the Act and a prohibition order prohibiting the respondents and interested parties from giving effect to the Act among others. The court issued the interim orders and recently extended the orders pending empanelment of an uneven number bench by the Chief Justice.

The effect of the conservatory orders has led to the government being caught in a quagmire on the next steps to take. This is because the Act authorises tax and revenue collection into the consolidated fund whereas the Appropriation Act allows for the spending and withdrawal of money from the consolidated fund against the approved budget. Therefore, the conservatory orders suspending the Act mean that the government is unable to collect revenue for withdrawal and spending by the government. If anything, the Kenya Revenue Authority, an interested party in the petition, stated in its submission that the government stands to lose Kshs.578,082,192 every day if the conservatory orders remain in force.

Whereas the national government is unable to collect revenue because of the suspension, the county governments will soon, if not already, be affected by the conservatory orders. This will lead to the disruption of services to Kenyans as a result of the unavailability of funds for the purpose of implementing the Division of Revenue Act. The Division of Revenue Act provides for the basis of the division of revenue collected in the consolidated fund from the various taxes imposed in the Act and the other relevant tax laws. The revenue is divided between the national and county governments for approved expenditure by the Appropriation Act and the County Allocation of Revenue Act.

Nonetheless, the suspension of the Act comes as a reprieve to Kenyans who were yet to come to terms with the stifling tax provisions in the Act. Kenyans, both corporates and individuals can breathe a sigh of relief for a little longer as some of the provisions suspended were meant to take effect on 1st July. Thus, Kenyans have the time to adjust their living expenses to suit the new changes if the Act is approved. Nonetheless, the suspension of the Act left many businesses in limbo with human resource and finance managers not sure whether to implement the provisions of the Act or not. This is because of the fear of being slapped with penalties by the revenue authority for failure to comply with the provisions of the Act.  However, with the risk of being charged with contempt of court, businesses have chosen to maintain the status quo until the court gives further direction on the Act.

To avoid violating the principle of sub-judice which prohibits discussing the merits of the case, we can only wait on the court to form a bench to hear and determine the petition with a view of unlocking the stalemate brought about by the conservatory orders sought in the interlocutory stage. Either way, the country is on a ticking bomb before the wheels of financing national, county governments and state organs come to a halt. In the meantime, it can be implied that taxes imposed in the Finance Act 2022 continue taking effect.