Review legality of new taxes

Excise Tax is a sin tax – a consumption tax imposed on the consumer over and above VAT. ILLUSTRATION | SHUTTERSTOCK

I don’t claim authority or domain knowledge when it comes to interpreting legal texts. But I am a very big fan of the public finance chapters of the 2010 Constitution.

I keep hoping that Mr Okiya Omtata or any other public-spirited litigation activist will one day go to the Supreme Court to settle the issue of the constitutionality of the so-called Sicpa excise stamp fees.

What kind of impost is this animal called excise stamp fees and where is the authority to impose it under our Constitution?

Is it a levy, a licence, a charge or a duty? Or isn’t it just a tax on another tax? Does the consumer suffer double taxation?

I know that the issue has been the subject of litigation in the High Court in the past. But the big issues in those proceedings were about how the regulations were introduced- whether there was public participation- and whether it is right and constitutional to tax a product like water.

My point is that we have not looked at how this impost sits within the broader totality and architecture of the list of imposts allowed under the 2010 Constitution.

Just the other day, the former Commissioner General of the Kenya Revenue Authority, Mr Githii Mburu, justified the recent massive increase in this controversial impost on a range of consumer products on grounds that the taxman needed to raise the stamp fees to collect the money to pay billions of shillings in debt owed to the service provider, namely, the Swiss multinational, Sicpa.

It begs the question: is it, really, constitutional to introduce an impost to settle a pending bill owed to a specific service provider?

After we have settled the debt with Sicpa, can we assume that the laws and regulations will be struck out from the statute?

Why aren’t we introducing other imposts to settle the mountains of billions of pending bills to road construction companies? It smells of discriminatory taxation.

As I said, I am not a lawyer. But when I read the Constitution, I see that we are allowed three types of imposts. The first is imposts that are applied for the purpose of raising revenues for the State, including taxes and duties.

Secondly, citizens pay to raise money that benefits them directly such as levies and user charges and finally, regulation-based imposts for the purpose of correcting social and economic harm.

I stand to be corrected but I don’t see where this Sicpa excise stamp fee sits in the Constitution. We all know that Excise Tax is a sin tax – a consumption tax imposed on the consumer over and above VAT.

The question that arises therefore is the following: When you impose a tax in the name of Sicpa stamp fees over and above Excise duties what social harm are you curing?

Excise stamp fees in Kenya are now among the highest in the whole of sub-Saharan Africa following the publication this week of a new legal notice containing new fees for excise stamps.

The move has implications for the cost of living crisis the country is grappling with because this new development means that prices of soft drinks, fruit juices, beer and cosmetics are bound to soar.

Predictably, manufacturers and importers will pass the extra cost to the consumer. We must also not forget the recent 6.3 percent adjustment for inflation on specific excise rates that were introduced in October 2022, and the adjustment of specific excise rates that was brought in July by the Finance Act 2022.

There will be other consequences in terms of regional competitiveness. We must brace for an upsurge in cross-border smuggling of excisable goods because excisable goods and services will now be more expensive in Kenya than they are within countries of member states of the East African Community.

Last year, the Confederation of Tanzania Industries, their manufacturers' lobby put up a big fight that forced the government to reduce stamp rates.

When it comes to taxes, this society endures injustice and unfairness with fatalistic resignation.

The rich are prepared to endure foolish laws and maddening amendments and instinctively prefer to circumvent the law than fight for their repeal.

This is why tax policy in this country does not result in the transfer of wealth from the rich to the poor but only from the honest rich to the dishonest rich.

Law-abiding citizens have been converted into tax dodgers by excessive taxation. We need to test all taxes and imposts introduced by the government to what our 2010 constitution says.

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