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November 19, 2018

Blow to KRA as court declares bottled drinks tax unconstitutional

A file photo of High Court judge John Mativo. /COLLINS KWEYU
A file photo of High Court judge John Mativo. /COLLINS KWEYU

The High Court has quashed a law that sought to impose taxes on bottled drinks, giving consumers a huge reprieve.

Justice John Mativo ruled on Monday that the manner in which the legal notice was imposed was inconsistent with the Constitution and the Statutory Instrument, hence it is null and void.

Legal Notice 53 of March 2017 imposed excise duty on bottled water, juices, soda and other non-alcoholic beverages and cosmetics.

Read: KRA eyes soda, bottled drinks to cool tax thirst

But the judge said Kenya Revenue Authority Commissioner General John Njiraini disregarded public interest.

Mativo also noted the KRA held two board meetings instead of going to the 47 counties to seek the views of members of the public who are the consumers.

"The imposition of exercise duty premised on the Legal Notice was not promulgated in a manner that conforms to the law hence has no legal basis" the judge said.

He said KRA's move to award SICPA securities a branch in Kenya and a five-year contract for the supply of Exercisable Goods Management Systems (EGMS) was also therefore null and void.

The Switzerland-based firm was awarded the contract at a cost of Sh15 billion.

"A declaration is hereby issued that public participation must apply to enact of all subsidiary and policy decisions."

Mativo further ruled that KRA was obligated to craft and implement a meaningful programme of public participation and stakeholder engagement, in the process of the tender, and ensure direct procurement to the firm met strict statutory requirements.

The suit was filed by activist Okiya Omtatah who challenged the proposed excise stamps on bottled drinks.

Under the contested regulation by KRA and Treasury, manufacturers were required to affix new generation excise stamps on their products.

The Public Investments Committee of the 11th Parliament reportedly suspended the implementation of the EGMS pending the conclusion of investigations by the National Assembly .

This followed a petition to Parliament filed that the Kenya Private Sector Alliance filed in June 2016.

Omtatah had told court that  the EGMS would illegally and unconstitutionally expose manufacturers, importers and consumers to the burden of meeting extra production costs.

He seeks to protect the public from the irregular, unlawful, oppressive and unreasonable burden of higher costs of living that will be brought on by the levy.

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