Industry

Bar owners accuse KRA of defying court on taxes

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Times Tower in Nairobi, the headquarters of Kenya Revenue Authority (KRA). Picture taken on Thursday, October 15, 2020. PHOTO | DENNIS ONSONGO | NMG

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Summary

  • The bar owners say the KRA system for filling tax returns still reflect higher excise duty charge on the commodities, creating confusion among manufacturers on the status of the freeze.
  • Pubs Entertainment and Restaurant Association of Kenya (Perak) say they will file a contempt suit against the taxman if it defies the court order to suspend the higher tax that has the effect of increasing beer tax.

Bar owners claim the Kenya Revenue Authority (KRA) has defied the courts and enforced a 4.97 per cent jump in taxes on beer, bottled water, juices and cigarettes which had been stopped this month.

The bar owners say the KRA system for filling tax returns still reflect higher excise duty charge on the commodities, creating confusion among manufacturers on the status of the freeze.

Pubs Entertainment and Restaurant Association of Kenya (Perak) say they will file a contempt suit against the taxman if it defies the court order to suspend the higher tax that has the effect of increasing beer tax.

It also has the implication of making the firms non-compliant with the tax laws because they are yet to file returns for beers sales made in November.

The KRA had on November 2, with the backing of a legal notice, raised the duty charged on about 30 products.

High Court on November 19 ordered that consumers of beer, bottled water, juices and cigarettes will continue paying the previous prices after it froze the KRA move to adjust excise duty by 4.97 percent.

Justice James Makau directed KRA to maintain the status quo to be maintained, which triggered confusion on whether the court meant the 4.97 percent rise should be maintained or frozen.

On December 15, the judge clarified that the status quo meant the higher tax should be frozen pending the determination of the suit.

“As at yesterday when the taxpayers were filing the returns, KRA systems had not been adjusted in compliance with the court order,” Pubs Entertainment and Restaurant Association of Kenya (Perak) said.

The taxman had initially targeted about Sh3.7 billion in additional revenue from inflation-adjusted taxation this fiscal year ending June 2022.

Manufacturers affected by the excise taxes have opposed the annual inflation adjustments, arguing that it leads to price instability and distorts the overall inflation.

They have proposed that the increment be spread over three years to give them enough time to adjust. The firms have also argued that uncertainty around the rate of annual changes would make it difficult for them to make long-term investment decisions.

Firms like East Africa Breweries Limited (EABL) #ticker:EABL have been raising beer prices by Sh10 per bottle in response to the inflation-adjusted tax.

Bar firms sued KRA for discrimination in implementation of the tax after the authority omitted fuel prices from the duty due to a court order.

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