Kenya's Supreme Court upholds disputed tax increase!

According to media reports, the Kenyan Supreme Court overturned the lower court decision on August 20, declaring the controversial Finance Act of 2023 constitutional and will effectively uphold the legislation. But the legislation had previously sparked an outcry across Kenya.

It is understood that the Kenyan Court of Appeal had previously declared the bill unconstitutional on the grounds that the public participation process was flawed. However, the Supreme Court did not think so and, according to its judgment, noted that the public had been fully consulted and taken into account in the legislative process. Therefore, it is essential to maintain the stability of the budget before next month's trial, and hearings will be held on September 10 and 11 on whether the 2023 Fiscal Act is in accordance with the constitution.

This year, the 2024 fiscal bill is supposed to be implemented, but in June, President William Ruto and the government released a new 2024 fiscal bill, but the bill sparked public discontent and broke out in the Kenyan capital Nairobi. During clashes between police and demonstrators, many people were killed and injured, and then spread to other parts of Kenya.

This led President Ruto to implement a series of measures, including refusing to sign the new fiscal bill and dissolving the government cabinet, but the public did not buy it and continued to march. In the end, the Kenyan Parliament voted to delete all 65 provisions of the 2024 Finance Act. As a result of the deletion of this year's new bill, taxes can only continue in accordance with the fiscal law of 2023.

The Kenyan government welcomes the Supreme Court's decision as a victory for its fiscal policy, but many Kenyans are still worried.

Opposition leaders and civil society groups expressed deep disappointment and concern and were challenged by the courts only after the opposition-led protests last year. All because of the 2023 fiscal bill, which doubled the value-added tax on fuel, introduced a housing tax (House Levy) and raised the top rate of personal income tax. As a result, some opponents believe that this fiscal law puts an undue burden on ordinary Kenyans, especially in the high cost of living and economic difficulties, which may once again trigger new protests.

For the coffee industry, although the fiscal bill is conducive to commodity exports, the increase in tax revenue undoubtedly has a negative impact on the coffee industry, increasing production and transportation costs and reducing profit margins. At present, the price of raw coffee beans is rising simultaneously due to the decline in production and the rise in international prices. Taxes may lead to higher prices of products such as coffee to make up for the tax burden, and may also affect consumers' desire to buy.

In addition, the biggest and most urgent problem at present is the implementation of the EU No deforestation Law (EUDR), which will be formally implemented in January 2025, which will deal a serious blow to the Kenyan coffee industry. All because 70 per cent of Kenya's main coffee market is the European Union, only about 30 per cent of Kenya's coffee industry is certified. Certification bodies such as the Rainforest Alliance (Rainforest Alliance) are trying to help farmers such as uncertified farmers, but it is difficult to complete the remaining 60 per cent in the remaining time.

In addition, since Kenya is mostly small farmers, even in the same production areas are scattered, many farmers know nothing about the new EU rules, and compliance costs are relatively high for some small farmers. Coffee industry insiders said that at present, the new EU regulations are not only a great challenge to Kenyan coffee cultivation, but also a test for the entire supply chain. The Kenyan government needs to take rapid action to encourage coffee cultivation, but the current political situation is relatively chaotic. The development prospect of the coffee industry is uncertain. If the production cannot be increased, prices will rise sharply.

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