The High Court in Kenya, has stopped a move by the Kenya Revenue Authority (KRA) to increase the excise duty on not less than 31 goods from the 1st of October 2021 pending the verdict of a suit that opposes the said taxes.
The 31 goods include Bottled Water, Beer, Juice, and Fuel.
Justice James Makau Monday decreed a temporary freeze on the plan by the Kenya Revenue Authority (KRA), stating that the case which is challenging the new taxes is likely to be successful.
A total of two individuals, had petitioned the court seeking that it stop the incoming move by the Kenya Revenue Authority (KRA) to raise the excise duty on the affected products by 4.96 percent in line with the Average Annual Inflation.
According to Isaiah Odando and Wilson Yata the move by the Kenya Revenue Authority (KRA) which is intended to be implemented from the 1st of October 2021 will put added pressure on the cost of living.
The court order is coming just days after the High Court also halted the Kenya Revenue Authority (KRA) from collecting 21 billion Kenyan Shillings via a minimum tax that was equivalent to one (1) percent of the total sales revenues of a business, even when it reports losses.
This is being seen by some as a setback for the Uhuru Kenyatta administration as it is reportedly looking to collect more revenues which will then be channeled towards the completion of a number of legacy projects in areas of priority like affordable housing and healthcare.
In the words of the Judge, “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.”
The Judge added that the petitioners have shown that the case is a matter of public interest with the possibility of constitutional rights also getting breached via the increase in tax.
The Judge stated that the lawyer for the Attorney-General; Mitchelle Omuom had not yet received any instructions regarding how to oppose the case.
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The Kenya Revenue Authority (KRA) has opposed the order which temporarily freezes the taxes. According to the Kenya Revenue Authority (KRA), the application is premature because the proposed levy has not yet been authorized by the Treasury Cabinet Secretary.
The High Court has also been informed that the decision to adjust the excise duty does not just stop with the Kenya Revenue Authority (KRA) since it will now for the first time, be required to seek approval from the Parliament before implementing the new rates. This is as a result of the changes to the law that was implemented this year.
The 4.97 percent tax will result in manufacturers transferring the added costs to the end users of their commodities in what could result in more outcry from the general public, over the higher cost of living.
Majority of the households in Kenya and the world at large, have not recovered from the negative effects the still ongoing Coronavirus pandemic has had on economies worldwide, resulting in widespread pay cuts, shutdown of businesses, as well as layoffs.
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Consumers will through the new tax have to pay 5.77 Kenyan Shillings more for every litre of Beer. Prices of Spirits on the other hand, will increase the most at 13.20 Kenyan Shillings.
1 litre of Kerosene will increase by 0.566 Kenyan Shilling, while Petrol will increase by 1.09 Kenyan Shilling putting the excise duty on that particular commodity, at 23.04 Kenyan Shillings.
Diesel will also increase by 0.566 Kenyan Shilling per litre.
The tax adjustment is reportedly in line with a law which instructs that excise duty be revised higher in direct correlation with the cost of living measure or the Average Rate of Inflation in the 12 months up until June 2021.
The economic policies of the Kenyan Government have come under more criticism recently with the citizens of Kenya, expressing their disapproval of the increase in the cost of living.
This coming at a time when the presidential elections are occurring in less than a year.
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The Kenya Association of Manufacturers (KAM) which is the industry lobby has continued to urge the Kenya Revenue Authority (KRA) to put a hold on the implementation of the Annual Inflation Adjustment Tax that affects excusable goods, stating that the economic difficulties brought on by the still ongoing Coronavirus pandemic, should be put into consideration.
Other items that will be attracting higher taxation include Motorcycles more popularly known as Boda Bodas, Bottled Water, and Cigarettes.
The cost of one stick of Cigarette, will increase by 0.16 Kenyan Shilling in line with the corresponding increase in excise tax from 3.31 Kenyan Shillings to 3.47 Kenyan Shillings. The excise duty for Bottled Water will increase from 3.31 Kenyan Shillings to 3.47 Kenyan Shillings per litre.
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