Consumers of beer, bottled water, juices and cigarettes will continue paying the current prices after the High Court froze Kenya Revenue Authority (KRA) move to adjust excise duty by 4.97 percent.
Justice James Makau directed KRA to maintain the status quo to be maintained, pending the determination of a case filed by an advocate Mwaura Kabata.
The lawyer moved to court saying consumers and manufacturers, as well as business owners, are set to suffer financially by the heightened tax pressure.
He said the move by the KRA to adjust the inflation rate is not based on research but instead the taxman has ‘blindly borrowed’ from past existing rates and if not checked, it will drive businesses down the drain.
“The period within the months of November and December are peak commercial season for the raft of goods affected by the gazette notice and if not checked, the action of the Commissioner-General will only serve to economically set back manufactures and business owners within the sectors afflicted,” he said in an affidavit.
Mr Kabata said the cost of products would rise leading to diminishing returns for business owners in the manufacturing sector, increased costs of the products in the market, which would lead to an influx in counterfeit products in the market.
“This will not only erode the market and business environment but also risk health and life whilst eroding consumer rights,” he said.
Bar owners also moved to court last week, seeking to challenge the gazette notice published by KRA on November 2.
The Pubs, Entertainment Restaurants Association of Kenya (Perak) argued the tax burden would increase beer prices and drive most of them out of business.
The KRA with the backing of a legal notice has raised the duty charged on about 30 products, including bottled water, juice, motorcycles and beer, by 4.97 percent to cover the inflationary erosion of collected taxes.
Consumers could pay as much as Sh5.77 more a litre of beer with the rise in the duty, which has been fixed at Sh121.85 from Sh116.08. The tax on spirits has gone up Sh13.20 to Sh278.70 per litre, while wine now attracts a duty of Sh208.20 per litre, a Sh9.86 rise.
“The petitioners, whose business is the sale and distribution of alcoholic and non-alcoholic beverages, tobacco and various other products whose sustainability will dwindle due to the increased cost of manufacturing,” the petition by Perak stated.
The operators say they are yet to recover from restrictions imposed to control Covid-19 including the night-curfew and closure of bars last year, adding that bars would take years to recover.
The taxman had initially targeted about Sh3.7 billion in additional revenue from inflation-adjusted taxation this fiscal year ending June 2022.