The Car Importers Association of Kenya (Ciak) has sued the Kenya Revenue Authority (KRA) on claims that the taxman has failed to involve stakeholders in discussions on the Current Retail Selling Price (CRSP) of used imported vehicles.
The CRSP is the price template used by the KRA to compare the actual invoice value of the car and uses the higher of the two. The customs value is then calculated by applying the depreciation to the CRSP value. The excise duty, import duty, value-added tax (VAT), and import declaration fee(IDF) are all calculated from the customs value.
In its petition at the High Court in Mombasa, Ciak, whose membership is drawn from importers of new and used motor vehicle dealers in the country wants a declaration that KRA violated the Constitution concerning computations of the CSRP values on used imported vehicles.
Through Gikandi and Company Advocates, Ciak argues that the law requires that the formulation of a new CRSP be subjected to public participation involving stakeholders in the motor vehicle dealership business and members of the public who are consumers. According to Ciak, on or about May 20, KRA held an unlawful forum to deliberate on and approve the new CRSP without inviting it, stakeholders, and members of the public through a public notice and without furnishing a draft of the intended new CRSP in good time to prepare.
“In a copy of the list of invitees, the petitioner further realized that there was no intention to invite a representative of the Kenya Bureau of Standards (Kebs) to the forum despite it being a major stakeholder by virtue of the fact that it is charged with inspecting all imported goods including new and used motor vehicles,” part of the suit documents state.
Ciak is seeking a declaration that the forum by KRA was held unlawfully without notice to the stakeholders and without furnishing the stakeholders with a draft copy of the intended new CRSP thus it was unlawful and deliberations and decisions emanating from it are null and void.
The association also seeks a declaration that KRA may only alter the CRSP published on its (KRA) website or the public portal in September 2017 only after the taxman fully complies with the law, particularly about giving the public and the stakeholders in the importation of used motor vehicles, the right to participate in the decision-making process.
The petitioner argues that from the deliberations of the forum, a decision was reached that KRA officers would start going around the country to collect views of members of the public on the intended new CRSP for publication.
“If KRA is not restrained from collecting the views of the members of the public and publishing the said intended new CRSP, it may at any time publish them (new intended CRSP) rendering the petition nugatory and occasioning the member of the petitioner irreparable damages,” argues Ciak.
It also argues that by failing to give the petition adequate notice to prepare and attend the meeting, its rights and those of other citizens as enshrined in the constitution were violated thus the process was flawed and should therefore not be allowed to proceed to completion.
The petitioner says that in the event KRA proceeds with the declarations of the applicable CRSP values for imported second-hand motor vehicles without its participation, the taxman is likely to arrive at values that are unreasonably too high.
It argues that such an outcome will result in the total selling price of each imported vehicle unit becoming higher on a proportionate basis of the increased taxation element and that higher sale values will result in a decline in sales.
“A decline in sales will result in reduced income for the petitioner which may lead to loss of employment for people who work for the petitioner either directly or indirectly,” says Ciak.
In his supporting affidavit, Ciak national chairman Me Peter Otieno stated that it was the duty of KRA to invite all stakeholders in the new and used motor vehicle dealership business and interested members of the public to the intended public participation forum through a notice and not to delegate the duty to the association.
“The petitioner did not comply with the KRA’s request to invite any of the individuals and entities listed,” stated Mr Otieno.
He added that without equal participation in deliberations for validation of a new CRSP, chances are high that they (new CRSP) will be oppressive and unreasonable as Ciak members cannot make any profit in their businesses unless they raise their retail prices.
The association also wants a conservative order issued to stop the KRA from taking any further step towards deliberating or arriving at a new CRSP based on the meeting it held on May 20 as the process is fundamentally flawed.
The case will be mentioned on June 12 for directions.
