- Justice James Makau Monday issued a temporary freeze on the KRA’s plan, saying that the case challenging the new taxes has a likelihood of success.
- Two people had petitioned the court to stop the impending decision by the taxman to increase excise duty on the products by 4.97 percent in line with average annual inflation.
The High Court has halted the plan by the Kenya Revenue Authority (KRA) to increase excise duty on at least 31 goods, including beer, fuel, bottled water and juice, from October 1 pending determination of a suit opposing the taxes.
Justice James Makau Monday issued a temporary freeze on the KRA’s plan, saying that the case challenging the new taxes has a likelihood of success.
Two people had petitioned the court to stop the impending decision by the taxman to increase excise duty on the products by 4.97 percent in line with average annual inflation.
Isaiah Odando and Wilson Yata argue that the decision by the KRA, which is slated to take effect on October 1, is set to put pressure on cost of living.
The order comes days after the High Court stopped the KRA from collecting Sh21 billion through a minimum tax -- equivalent to one percent of a business’s total sales revenues, even when it reports losses.
This is a blow to President Uhuru Kenyatta’s administration that is seeking to collect more revenues to complete his legacy projects in priority areas such as healthcare and affordable housing despite soaring public debt and a gaping fiscal deficit.
“If the interim order is not granted, the petitioners and Kenyans will stand prejudiced. There will be danger to Kenyans in the further increase of fuel prices if KRA adjusts the excise duty rates on October 1 as proposed, although the decision is pending approval by the Cabinet Secretary National Treasury,” said the judge.
He added that the petitioners demonstrated that the case is a matter of public interest and that their constitutional rights are under threat of being breached through the tax increases. The judge noted that the Attorney-General’s lawyer Mitchelle Omuom was yet to receive instructions on how to oppose the case.
The KRA opposed the order temporarily freezing the taxes, terming the application premature because the proposed levy is yet to be authorised by the Treasury Cabinet Secretary.
The court was also informed that decision to adjust the excise duty does not end with the KRA, since the taxman will for the first time be required to get parliamentary approval to effect the new rates.
This follows changes to the law that took effect this year.
The 4.97 percent tax will see manufacturers pass on the additional cost of the commodities to end users in what may further stoke public outrage over the high cost of living.
Most households are yet to recover from the effects of the Covid-19 pandemic, which triggered layoffs, pay cuts and business closures.
Consumers will pay Sh5.77 more for a litre of beer while the prices for spirits will rise highest at Sh13.20.
A litre of petrol will increase Sh1.09, pushing excise duty to Sh23.04 on the commodity, while diesel and kerosene will increase by Sh0.566 per litre each. The adjustment is in line with the law that demands that excise duty be revised upwards in tandem with the cost of living measure or the average rate of inflation in the 12 months through June.
While the next election is less than a year away, the government’s economic policies have come under increased scrutiny with citizens angered by increasing costs of living.
Industry lobby Kenya Association of Manufacturers (KAM) has consistently urged the taxman to pause implementation of the annual inflation adjustment tax that affects excisable goods, citing economic hardships as a result of the Covid-19 crisis.
Other items that are set to attract higher taxation are cigarettes, bottled water and motorcycles (boda boda).
The price of one stick of cigarette will increase by Sh0.16 in line with the rise in excise tax from Sh3.31 to Sh3.47 while the duty on bottled water will rise from Sh3.31 to Sh3.47 per litre.