City Hall, the headquarters of the Nairobi City County Government.
The quashing of the Nairobi County Finance Act 2023 by the High Court last month has brought into focus a mandatory section of the law often overlooked by the devolved units when proposing fees and taxes to be levied.
Section 120 of the County Governments Act, 2012 requires county governments to develop a tariff and pricing policy, which would guide the determination of the charges, fees, levies and taxes to be imposed.
The purpose of the tariff and pricing policy, according to lawyer Enock Ongiti, is to map services to costs, justify fees, and align revenue streams with service delivery.
Mr Ongiti said the proposed fees and charges should have the rationale behind them or how they were calculated.
While quashing the Act, Justice Bahati Mwamuye said the cumulative effect of procedural lapses, the absence of lawful justification, and failure to provide information, rendered the Nairobi County Finance Act, 2023 unconstitutional.
“It offends the principles of rule of law, good governance, and accountable taxation,” said the judge.
Justice Mwamuye said while county governments might face time and resource constraints, these cannot justify inadequate disclosure or superficial consultation when matters affect citizens’ rights and obligations.
The court noted that the Finance Act introduced sweeping fiscal changes without demonstrating any consultation based on intelligible, accessible information.
The judge said the public was denied a chance to influence decision-making, undermining the very foundation of participatory democracy.
The case was filed by Jared Ngisa Nyabuto who submitted that the Act was enacted without the procedural and participatory measures outlined in the constitution.
Mr Nyabuto said the Nairobi County government enacted and implemented revenue-raising measures introducing, revising, and increasing numerous fees, levies, and charges under the Finance Act without first developing, adopting, and implementing a county tariffs and pricing policy, as required under section 120 of the County Governments Act.
Through Mr Ongiti, the petitioner said the provision of the County Government Act uses the word "shall," signifying that the formulation and adoption of a tariffs and pricing policy is a legal precondition to any imposition of fiscal charges by a county government.
Mr Ongiti pointed out that the Finance Act contained fiscal measures such as cess, market stall fees, and inspection levies.
Other charges include doubled landing fees for animals, increased cremation fees, new environmental charges, and market stall levies.
He added that none of the proposed fees were tied to any commensurate service improvements or costings.
Further, there was no corresponding revenue legislation authorising their imposition.
The lawyer said the tariffs and pricing policy acts as a public information tool and its absence not only violates the law but creates an opaque fiscal environment, contravening the constitutional expectation of reasoned decision-making under Article 47 of the constitution.
He added that the Public Finance Management Act (PFMA) reinforces the need for transparent, rational frameworks for revenue measures.
Mr Ongiti explained that county governments must prioritise the development and implementation of a tariffs and pricing policy before enacting any finance acts that impose fees, taxes, or levies.
The policy, he said, must outline how the fees and taxes are determined and ensure they are proportional to the cost of services provided.
Without the policy, Mr Ongiti said the basis for determining revenue measures is non-existent, irrational, and opaque.
Mr Nyabuto said in court documents that in the absence of data or a structure showing how fees were calculated, the public was deprived of the essential information needed to express informed opinions, rendering the process meaningless and ineffective.
He added that there was no record of policy deliberations, debates, or approval by county Executive or Assembly.
Mr Nyabuto claimed that the supplementary budgets were presented hastily without clear justification for block adjustments, contravening PFMA Regulations requiring alignment with fiscal responsibility principles.
To support his case, Mr Nyabuto tabled a Commission on Revenue Allocation advisory of April 2023, which urged counties to enact revenue-raising legislation in compliance with constitutional requirements.
The petitioner emphasised that the advisory underscored the mandatory nature of tariffs and pricing policy, in preparing revenue legislation.
“The Petitioner’s uncontroverted evidence shows that Nairobi City County did not develop, adopt, publish, or implement any tariffs and pricing policy before enacting the impugned Finance Act, 2023,” said the judge.
The court said the right to participate in governance processes, especially those involving taxation or public finance, must be real and not illusory.
“The process of enacting fiscal policy must ensure that affected parties are not only notified but are also made aware of the justification and implications of proposed measures. The absence of a Tariffs and Pricing Policy meant that stakeholders could not interrogate or question the economic rationale behind the imposition or increase of charges,” said Justice Mwamuye.
Mr Ongiti said moving forward, county governments must ensure they follow proper procedures, engage meaningfully with the public, and provide transparent, justifiable fiscal policies.
“The ruling also sends a clear signal that counties must adhere to procedural requirements regarding public participation as outlined in the County Governments Act and other relevant statutes,” said Ongiti.
The lawyer said these include making information timely, accessible, and comprehensible to the public.
Mr Ongiti said it is not sufficient for county governments to present schedules of proposed charges without the supporting justification for the measures.
The court said public participation is not a procedural formality but a substantive constitutional imperative, adding that it must not be cosmetic or superficial, but must be meaningful, effective, and informed.
“The judgment also underscores the importance of genuine public participation in the legislative processes of county governments, particularly when it comes to the imposition of taxes, levies, and fees,” he said.
