Mbadi explains how he will raise taxes without Finance Bill in place

Treasury Cabinet Secretary nominee John Mbadi has urged the public to remain calm after the contentious Finance Bill, 2024 was withdrawn due to significant backlash and the Finance Act, 2023 was declared unconstitutional.

Appearing on Saturday before the Committee on Appointments, Mbadi said that there is no immediate need for a Finance Bill because the constitutional framework allows for amendments to be made in September rather than in July.

“I want to assure Kenyans that there is no need to panic. In the tenth Parliament, the Finance Bill was traditionally passed in September. We had three months into the financial year to complete this process. At that time, the Minister had the legal authority to collect interim taxes until the bill was enacted by September 30. Therefore, there is no cause for alarm, as we have a constitutional framework that supports this approach,” he said.

He added that although there was a widespread rejection of the Finance Bill 2024, particularly among young Kenyans, it still contained valuable revenue-raising measures.

According to Mbadi, the main issues that led to the Bill’s downfall were inadequate public participation and poor communication. 

“I believe there are good provisions that have been lost in the Finance Bill (2024) that are not contentious, and we can bring them as specific amendments with proper public participation. The problem we had was that the public felt they were not listened to,” he explained. 

Mbadi also highlighted that the Finance Bill usually includes a limited number of tax amendments, which he pledged to address through specific statutes if appointed.

“We don’t have a lacuna. In fact, the Finance Bill is an omnivorous amendment Bill. We have about five or six that the Finance Bill usually amends. Among them are excise duty, import duty, value-added tax, income tax, and the Tax Procedures Act, and we have fees and levies. These are specific legislations that, if I’m approved, this house should help me ensure they touch these specific statutes. We don’t need to have a Finance Bill but I will seek specific guidance from the Attorney General,” he said.

On June 26, President William Ruto declined to sign the Finance Bill into law and called for its withdrawal following deadly protests across the country. Ruto said he had listened to the views of Kenyans and would go by the wishes of the people.

“Listening keenly to the people of Kenya, who have said loudly that they want nothing to do with this Finance Bill 2024, I concede, and therefore I will not sign the 2024 Finance Bill and shall subsequently be withdrawn,” he said during a televised address from State House, Nairobi.

In response, Ruto implemented several austerity measures, including the dismissal of his entire cabinet and the appointment of new members.

Additionally, on July 31, 2024, the Court of Appeal ruled that the Finance Act, 2023, was unconstitutional due to fundamental flaws in its enactment process.

In a judgement delivered by a three-judge bench led by Judge Kathurima M'Inoti, along with Judges Agnes Kalekye Murgo and John Mativo, the court found that the enactment of the Finance Act, 2023, violated several constitutional provisions.

Specifically, the process breached Articles 220(1)(a) and 221 of the Constitution, as well as sections 37, 39A, and 40 of the Public Finance Management Act (PFMA), which governs the budget-making process.

The court ruled that these violations rendered the entire Act unconstitutional and void from the outset. If approved, Mbadi will need to find ways to address these legal and procedural challenges.