Uncertainty and Questions Surrounding the Finance Bill 2024: Presidential Withdrawal, Legislative-Process, and Fiscal Implications

This Article is dedicated to everyone who lost their lives fighting for a better Kenya, to those who sustained injuries, to everyone who was abducted for speaking out against an oppressive regime and to all of us who took to the streets to protest against this regime. May the souls of our fallen heroes rest in peace, may God grant their families strength and grace, and may we one day achieve full liberation from all oppression.

Pres. Ruto’s Presidential Referral Memorandum clarified some points but still left me with a few questions. It was clear from the Standing Orders and the CoK that Ruto cannot withdraw a bill. So, who then can withdraw the Finance Bill? The CS National Treasury proposes revenue-raising measures through the Finance Bill, after which the Finance and Planning Committee takes over. So, shouldn't the appropriate person to withdraw a Finance Bill be the Chair of this Committee, Molo MP Kuria Kimani?

Art. 115 settles the issue of the President rejecting a bill. Ruto played a somewhat smart move here, though, because his recommendations were the complete deletion of all the clauses. The president will not be overstepping his role here or overstepping the role of the legislature since Parliament will still have to consider the bill under Art. 115(2) and 115(4). The Speaker’s communication regarding the receipt of the referral memorandum showed that the referral memorandum will not disrupt the MPs' recess and that the Finance Bill was forwarded to the Finance & Planning Committee, who will then report to the house during their next general session. This means that the Finance Bill 2024 is technically dead. But what exactly will the president assent to under Art. 115(3) after Parliament accommodates his reservations and does away with the bill?

The next thing that comes to mind is the fate of the other bills birthed by the budget process. The Appropriation Bill 2024 is bound to suffer the same fate as the Finance Bill—it's a horse-and-carriage relationship. If you do not have a way of raising money, then you surely cannot have a way of spending it. One more very surprising thing regarding the Appropriation Bill 2024, however, is that after amendments to the Finance Act 2024, the realizable revenue dropped from Kshs. 346B to Kshs. 200B. Despite this, the Appropriation Bill remained mostly unchanged, with very few amendments to the expenditure. (We are reducing the amount of money we are making, but we are not reducing the amount of money we are spending.)

If the President does not approve the Appropriations Bill 2024 by midnight on June 30th, Article 222 of the Constitution addresses this situation and provides the course of action. It states that if the Appropriation Act for a financial year is not approved or is unlikely to be approved by the start of that financial year, the National Assembly can authorize the withdrawal of funds from the Consolidated Fund. Also, the total amount withdrawn with the National Assembly's authorization must not exceed half of the expenditure estimates for that year as presented to the National Assembly.

Now, the next question is: what happens to the budget allocation in the upcoming fiscal year? Starting next week, which marks the beginning of FY 2024/25, the tax measures introduced by the Finance Act 2023 will stay in place. The Court of Appeal's decision on the Finance Bill 2023 has suddenly become crucial.

What happens to the revenue meant for various sectors that needed more funding this fiscal year? Finance Bill 2024 aimed to raise Kshs. 346B, but this dropped to Kshs. 200B out of a Kshs. 3.41 trillion revenue target. The President's austerity measures regarding expenditure on travel, motor vehicles, renovations, etc., may offset this reduction, but there are still lingering questions about expenditure and revenue allocation. This leads to the next question.

What about the fiscal deficit target? This year’s target had been set to be less than 4.0% of GDP. The Budget Statement, which relied on Finance Bill 2024 projections, projected the deficit to be 3.6% of GDP. With the Finance Bill 2023 likely to take effect, what fiscal deficit target are we now looking at for 2024/25?

The Government is addressing the concerns around the unpredictability of our tax regime through the National Tax Policy. It’s been in the works for the last two years or so, and I'm unsure of its current status. However, it is expected to address the challenges we face with taxes and perhaps eliminate the need for the Finance Bill. I skimmed through the draft, and they have suggested a review of the tax law once every year. This hopefully means that we will have to deal with the Finance Act once every year and it will provide clarity and stability in tax policy.