The Finance Bill 2023 Proposed Changes to the Tax Appeals Tribunal Act: A Fetter on Tax-Payer’s Access to Justice

By: Ibrahim Kitoo, Advocate of the High Court of Kenya, Legal Counsel & Certified Secretary

On 4th May, 2023, the Finance Bill 2023 was laid before the Kenya Parliament. This is one Bill which is a water-shed in Kenya’s tax legislation history. Against the backdrop of an economy that is grappling with constrained fiscal space, a rapidly depreciating balance of payments position and inflation, the essence of the Bill is to legally empower the tax-man to with ease collect the much needed revenue with a set budget of 3.6 trillion to run and grow the Kenya economy organically and with little borrowing as possible.

There however lies one legal challenge with the proposal under the Bill to amend the Tax Appeals Tribunal Act, 2013 by enacting a requirement for any tax-payer dissatisfied with the decision of the Tribunal to either deposit an amount or provide security equivalent to 20% of the disputed tax before filing any appeal at the High Court provided that where a tax payer wins the appeal at the High Court the Kenya Revenue Authority shall credit the amount/security to the tax payer within thirty (30) days. Historically, in year 2022 the Finance Bill sought to achieve a similar outcome by providing for 50% deposit of the disputed tax amount with the Central Bank of Kenya. This proposal suffered as false-start in that the Parliament rejected the same.

Indeed, the Supreme Court of Kenya in February this year in the case of Westmont Holdings Limited (Appellant) and Central Bank of Kenya, Kamlesh Mansukhlal Pattni & Uhuru Highway Development Limited declared itself on the need to have security for costs to be judiciously looked into to avoid being used to hinder access to justice. The court reiterated the need to be mindful of the spirit, values and principles under Article 159 of the Constitution. The essence is to ensure that justice is done to all irrespective of status and in a manner that protects and promotes the principles of fairness and access to justice and without unnecessary fetters; that it was the intention of the drafters of the Constitution to have a properly functioning judicial system that is accessible to all persons to ensure and promote equality of all persons before the law. In conclusion, the Supreme Court made a declaration that the order for security for costs made in the matter at the Court of Appeal was unreasonable as it impeded the appellant’s access to justice by imposing a condition precedent before a matter could be heard contrary to Articles 48, 50 and 159 of the Constitution.

Additionally, in the Nairobi High Court Petition Number E226 of 2020 filed by the Board and Civil Engineering Contractors Association & Energy Sector Contractors Association ?against the Attorney General, Cabinet Secretary National Treasury, the Public Procurement Administrative Review Board and the Public Procurement Regulatory Authority; and the Nairobi High Court Petition Number E332 of 2020 and filed by Jackson Wanjiru Ikua against the Attorney General, Cabinet Secretary National Treasury, the Public Procurement Administrative Review Board and the National Assembly, conservatory orders were issued against the enforcement of Regulations 203 and 218 of Public Procurement and Asset Disposal Regulations, 2020. The said regulations made a requirement for refundable deposit of 15% of the applicant’s tender sum and 3% security fee as a condition precedent for filing of a public procurement review before the Public Procurement Administrative Review Board and judicial review before the High Court respectively.

A simple reason why the efforts to amend the Tax Appeals Tribunal Act, 2013 to make a provision for deposit of the 20% amount or equivalent security in lieu as a condition precedent to admission of an appeal on the Tax Appeals Tribunal decision by a tax payer is a wrong move is that it runs afoul to and defeats the well settled constitutional tenets and legal principles that (i) no man shall be condemned unheard; (ii) every person has the right to an administrative action that is, among others, lawful, reasonable and procedurally fair; (iii) right to fair hearing and to be presumed innocent until proven guilty. Nevertheless, the thirty (30) day timeline for refund of the deposit paid for appeal is commendable provided that the timelines will be strictly adhered to by the taxman. There may also be need to establish a specific fund to hold the security/deposit paid on appeal and provision for interest on the same to safeguard against redirection of the funds and to guarantee payment plus interest earned to the taxpayers in instances where the High Court issues judgment in favour of the taxpayers.

Is it time for rethink the proposed changes to the law? Yes!