NAIROBI, Kenya, July 17 – The Supreme Court has upheld tax waivers granted to Japanese firms and their employees working on Kenya-funded development projects, dismissing a petition by activist Eliud Karanja Matindi that challenged the legality of the exemptions.
The apex court ruled that Parliament followed the law in approving Legal Notice No. 15 of 2021, which exempted Japanese companies, consultants and employees involved in projects financed under bilateral agreements between Kenya and Japan from paying income tax.
The judges found that the National Assembly complied with the constitutional and statutory process by considering the legal notice after it was tabled in Parliament, as required under the Income Tax Act.
They also noted that bilateral agreements are now governed by the Treaty-Making and Ratification Act, which provides for Cabinet and parliamentary approval before they become part of Kenyan law.
Matindi had argued that the tax waivers were unconstitutional, discriminatory and introduced without adequate public participation.
He sought to have the legal notice quashed and asked the court to compel the Kenya Revenue Authority (KRA) to collect income tax from the affected Japanese firms and publish details of the financing agreements.
However, the Supreme Court held that the petitioner had challenged the wrong legal instrument.
The judges ruled that any claim of discrimination ought to have been directed at the bilateral financing agreements themselves rather than the legal notice implementing them, since the notice did not contain the specific terms of those agreements.
The court further observed that Parliament had debated the legal notice after significant progress had already been made on some of the projects, with legislators noting that tax exemptions were a standard condition attached to Japanese government financing agreements and that the overall benefits outweighed the tax relief granted.
