Economy

Appellate Court rejects KRA bid to double excise stamp taxes

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Times Tower in Nairobi, the headquarters of Kenya Revenue Authority (KRA). FILE PHOTO | NMG

Consumers and manufacturers have won fresh reprieve after the Court of Appeal declined to lift an order stopping the Kenya Revenue Authority (KRA) from doubling excise stamp taxes on beer, bottled water, and cosmetics.

The regulations, which were published early this year, sought to adjust the price of excise stamps applicable to excisable goods by increasing the cost of these stamps.

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The court stopped KRA from implementing the regulations in May after the LSK challenged the regulations, arguing that their implementation threatened the survival of manufacturing businesses engaged in the sale of consumables and that there was no justification for increasing the cost of the revenue stamps.

The taxman moved to the Court of Appeal stating that it was bound to lose revenue in terms of procuring excise stamps, as it would be forced to use taxes to procure the same.

A Bench of three judges of the Court of Appeal said that they were not convinced by KRA’s argument as High Court judge Hedwig Ong’udi did not stop the taxman from collecting revenue based on the old stamps, even as the petition awaits determination.

“Therefore, the claim that the appeal will be rendered nugatory on account of emasculation of its tax collection mandate is a far cry in the wild; and cannot hold,” Justices Helen Omondi, John Mativo, and Grace Ngenye ruled.

KRA had argued that the blocking of the regulations would interfere with revenue collection to the extent that it would not be able to recoup the excise tax for goods already sold during the intervening period. It pleaded with the court to preserve the prevailing status quo in its favour.

LSK sued the taxman, Treasury, and the Attorney-General arguing that the regulations were not subjected to public participation and they were improper as they sought to adjust the price of excise stamps by increasing the cost of the stamps.

According to LSK, the imposition of oppressive taxes was unconstitutional as the regulatory impact assessment had not been tabled before Parliament for consideration as required under Section 11 of the Statutory Instruments Act.

The LSK said in the petition that the implementation of the regulations will see a sharp increase in prices of most commodities, which is a threat to the survival of manufacturers engaged in the sale and distribution of consumable products.

In the ruling, the judge said that state organs are required to carry out their mandate in compliance with the Constitution and set statutory laws.

“The exercise of this mandate contrary to the law not only prejudices the petitioner but the public at large. In this matter, I am persuaded that the public interest outweighs the respondent's mandate and tilts in favour of the petitioner. Therefore, putting the above in mind, I am satisfied that the principles of granting conservatory orders sought in this matter have been satisfied as will aid in meeting the ends of justice," the judge said.

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The proposed regulations seek to increase the fees of excise stamps for bottled water, juices, and any other non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products, and export products.

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