Why Finance Bill is not an Annual Constitutional requirement in Kenya

Protestors during Occupy Kisumu protest against finance bill 2024/25 that took part from Kondele Roundabout to Jaramogi Oginga Odinga sports ground in Kisumu City. [Michael Mute, Standard]

Last year, Kenya was rocked by fierce protests over the Finance Bill 2024, culminating in the dramatic storming of Parliament on June 25, 2024, where several lives were lost. The President, responding to the overwhelming public outcry, sent a memorandum back to Parliament proposing the deletion of all clauses in the Finance Bill. But lost in the chaos and heated debate is a critical constitutional point-whether Kenya is legally bound to pass a Finance Bill every year.

While the Public Finance Management (PFM) Act, 2012, provides for an annual Finance Bill, the Constitution itself contains no such obligation. The confusion arises from the intricate legal framework governing government finance. Article 221 of the Constitution mandates the annual submission and approval of budget estimates by the National Assembly, which are then incorporated into an Appropriation Bill. This Appropriation Bill, once passed, authourises the government to withdraw funds from the Consolidated Fund for expenditure. The Appropriation Act is essential; it gives legal force to the government's spending plans. Without it, the government cannot lawfully access funds to operate.

However, the Finance Bill serves a different function. It focuses solely on revenue-raising measures, often by amending tax laws. It is not inherently linked to the approval of expenditure. The Supreme Court has interpreted Article 221. It emphasised that the Appropriation Bill is sequenced after the Division of Revenue Bill, which determines the equitable share of revenue between the national and county governments. Nowhere does the Constitution state that the passage of a Finance Bill is a precondition for the Appropriation Act. Justice Wilfrida Okwany, in a case filed by Senator Okiya Omtatah against the National Treasury, underscored this point.

The court held that the Finance Bill, which amends tax and duty laws, is not part of the estimates of government expenditure. It observed that even though it might be desirable to consider the Finance Bill before or alongside the Appropriation Bill, the law does not constitutionally require it. According to the PFM Act, the Cabinet secretary is tasked with submitting the Finance Bill by April 30, with Parliament expected to pass it by June 30.

The Act outlines detailed procedures, using mandatory language like "shall," leading many to assume that the Finance Bill is an unavoidable annual event. But this is a misconception. The Finance Bill is simply an amendment Bill. Like any other amendment to an existing law, it can be introduced at any time during the year when there is a need to adjust revenue measures.

If Parliament decides not to introduce new tax changes or if proposed amendments are rejected, the country simply continues under the tax laws enacted the previous year. The absence of a Finance Bill does not nullify the government's spending authority, nor does it paralyse national operations. The system is designed with flexibility. Article 222 of the Constitution even provides a fallback mechanism that if the Appropriation Act is delayed, the National Assembly may authorise temporary withdrawals from the Consolidated Fund to keep the government running. The government retains the legal authority to spend, based on the estimates approved by Parliament.

While the PFM Act assumes the passage of a Finance Bill every year, this is not anchored in constitutional necessity. Rather, the need for a Finance Bill arises only when the government seeks to introduce new or revised revenue measures. If the budget framework approved by Cabinet can be supported by existing tax laws, then there is no legal or operational requirement for fresh amendments.

Differently put, the Finance Bill is an amendment mechanism, not a stand-alone or original legislative requirement. Like other amendment Bills, it can be debated, modified, or rejected, and its absence does not create a constitutional crisis.

Additionally, the Constitution makes provisions to ensure continuity of government services even in times of legislative deadlock. Article 222 allows the National Assembly to approve interim withdrawals from the Consolidated Fund, capped at half the budgeted expenditure, until the Appropriation Act is formally enacted. This ensures that essential government operations, including the payment of salaries, debt obligations, and pensions, continue uninterrupted.

Ultimately, Kenya's fiscal framework is robust, designed to allow the government to function even in turbulent political or economic times. While the annual Finance Bill has become an established legislative practice, it is not an immutable constitutional requirement. Recognising this distinction is crucial, especially in moments of political tension when public discourse risks being clouded by assumptions rather than grounded in legal facts.

Leaders and the public alike would benefit from a clearer understanding of the true legal architecture that governs public finance. The Constitution's requirements centre on the Appropriation Act, which anchors government spending. The Finance Bill is secondary, introduced when necessary to adjust revenue streams, but its absence is neither illegal nor unconstitutional.

In times of fiscal strain, understanding these distinctions can prevent unnecessary panic and ensure that debates remain rooted in constitutional clarity. In conclusion, the absence or rejection of an annual Finance Bill does not amount to a constitutional violation. Kenya's Constitution provides the tools to manage government spending and maintain essential services, even without annual amendments to tax laws. What matters most is the prudent management of public resources within the framework set by the Appropriation Act, backed by the existing tax regime. This clarity is critical for informed public debate and sound fiscal governance. Let Katiba guide us.