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March 22, 2018

No excise on soft drinks, makeup, High Court rules

KRA officials display some of the mineral water which they confiscated during the raid to crack down water companies which evade tax in Mombasa on march 13,2014./FILE
KRA officials display some of the mineral water which they confiscated during the raid to crack down water companies which evade tax in Mombasa on march 13,2014./FILE

High Court has stopped Kenya Revenue Authority from imposing tax on bottled water, non-alcoholic drinks and cosmetics.

Justice John Mativo said KRA’s move to impose excise duty on bottled water, juices packed in plastic bottles, energy drinks, food supplements as well as cosmetics was unconstitutional.

Mativo ruled the imposition of the tax creates an unfair tax burden on the public and manufacturers.

“A declaration is hereby issued decreeing that Legal Notice Number 53 of March 30 2017 was enacted in a manner inconsistent with the constitution, and the statutory Act, hence null and void,” said Mativo.

He said there was inadequate public participation prior to the promulgation of the legal Notice and faulted Commissioner General John Njiraini for failing to involve Kenyans, who, he said, would have been more burdened with the tax.

The tax man wanted manufacturers of non-alcoholic beverages and cosmetics to affix excise duty stamps on their products as it rolls out a system to broaden tax compliance.

“The taxation burden will affect the entire public and it cannot be imposed on the citizens yet they were totally excluded from the process.”

Mativo, while deciding in the case filed by activist Okiya Omtatah, noted that KRA, instead of seeking views from Kenyans across the country, only held two board meetings in Nairobi, which he said cannot be adequate, nor be safely assumed to have reached Kenyans in all counties.

Omtatah went to court after KRA announced its decision which was to take effect beginning November 2017.

Omtatah had accused Njiraini of abusing the law by directly procuring the services of SICPA Securities- a Switzerland based firm with a branch in Kenya, to oversee the implementation of Excisable goods, Management Systems (EGMS) at a cost of Sh15 billion.

The judge said KRA failed to demonstrate that the omission to undertake public participation was justifiable or necessary.

He concluded that KRA also failed to demonstrate that the direct procurement and the award of the tender to the firm satisfied the tests prescribed under the law.

“KRA was obligated to craft and implement a meaningful programme of public participation and stakeholder’s engagement in the process of the tender and ensure direct procurement to the firm met the strict statutory requirements,” he said.

Justice Mativo reasoned that taxation should be imposed only in accordance with national values and principles of governance among them equity and fairness in the distribution of tax burden.

KRA on its part had opposed the case and asked it be dismissed on grounds that the Court lacks the mandate to determine the dispute.

It was KRA’s argument that the Public Procurement and Administrative Board should handle the issue and that adequate public participation was done.

Omtatah says the EGMS will 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 living costs to be brought on by the levy.

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