The High Court has reasserted Parliament’s exclusive authority over taxation, effectively clipping the National Treasury’s ability to impose or vary taxes through executive action.
This comes as a blow to the exchequer, which has been riding on executive powers to implement changes anchored in regional trade arrangements.
The court ruled that the Executive cannot introduce or adjust taxes without parliamentary approval and meaningful public participation, reinforcing the constitutional principle of “no taxation without representation.”
Price Waterhouse Coopers Senior Manager for Customs & International Trade, Corazon Ongoro, says that in doing so, the judges clipped Treasury’s growing reliance on East African Community (EAC) mechanisms to effect domestic tax changes without going through Kenya’s legislative process.
At the centre of the dispute was the 10 per cent import duty imposed on crude and refined palm oil following Kenya’s application for a stay of the EAC Common External Tariff (CET).
“The High Court consequently declared the 10 per cent duty unconstitutional, null and void, prohibited its implementation and directed that any future Common External Tariff (CET) stay applications must undergo prior parliamentary scrutiny and public participation,” said Ongoro.
The palm oil case was brought by the Consumer Federation of Kenya (COFEK), which argued that the duty would drive up food prices in a country already grappling with a high cost of living.
The court agreed that consumer interests were a legitimate consideration, even though it grounded its decision primarily in constitutional procedure rather than economic rights.
Treasury and the Kenya Revenue Authority (KRA) had argued that the levy was lawfully introduced through EAC procedures and was necessary to protect local industry and curb revenue losses arising from misdeclaration.
The court disagreed, holding that while Kenya is a member of the EAC and bound by its protocols, regional obligations cannot override the Constitution.
Any tax imposed within Kenya, the court said, must comply with Articles 94, 201 and 210 of the Constitution, which vest taxing power in Parliament and require public participation, transparency and accountability.
The Petitioner argued that imposing or varying taxes is a legislative function vested exclusively in Parliament.
“On the issue of parliamentary approval, the HC emphasized that taxation is a sovereign function that cannot be delegated to external bodies. The principle of “no taxation without representation” was reaffirmed as a fundamental safeguard, and the Court declared the duty unconstitutional for reasons that Parliament was bypassed,” added PwC partner for tax and legal services Job Kabochi.
For years, Treasury has increasingly leaned on legal notices, regulations and regional instruments to introduce or amend taxes outside the annual Finance Act cycle.
This approach has often been justified as necessary for fiscal agility, allowing the government to respond quickly to revenue shortfalls, trade distortions or economic shocks.
The experts argue that by declaring the palm oil duty unconstitutional, the court sent a clear message that administrative convenience or regional alignment cannot be used to bypass Kenya’s democratic and legislative safeguards.
Even where a tax change originates from EAC decisions, it must still be subjected to parliamentary debate and public input before it can lawfully take effect.
Legal analysts say the judgment strengthens Parliament’s hand at a time when a section of MPs have increasingly complained of being sidelined in tax policymaking.
Under the EAC Customs Union, member states apply a Common External Tariff but may seek stays or variations for sensitive goods.
Treasury has treated approvals at the regional level as sufficient legal cover to implement new duties domestically.
The court rejected that interpretation, holding that EAC approvals are not self-executing within Kenya. Instead, they must be domesticated through constitutionally compliant processe,s including parliamentary approval.
The ruling now exposes KRA to potential claims running into hundreds of millions of shillings, depending on volumes imported in the period.
Treasury had warned that striking down the tax would result in revenue losses and encourage misdeclaration. The court dismissed those concerns, holding that enforcement challenges cannot justify unconstitutional taxation.
by JACKTONE LAWI
