The Appellate Court in Kenya has refused to cancel an order preventing the Kenya Revenue Authority (KRA) from increasing the excise stamp taxes applicable to excisable goods.
Earlier in the year, the KRA had introduced certain regulations seeking to double excise stamp taxes on beer, bottled water, and cosmetics.
The Court of Appeal stopped, however, back in May, preventing the taxman from implementing the regulations as there were arguments that doing so threatened the survival of manufacturing businesses that deal in consumables and that there was no justification for the increment in the cost of these stamps.
Defending its stand, the KRA argued at the Court that failure to implement these regulations would mean loss of revenue for it in terms of acquiring excise stamps, as it would be forced to use taxes to acquire the same.
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Also, it would be impossible for the taxman to recover the excise tax for goods previously sold during the intervening period.
However, a Bench of three judges of the Court of Appeal expressed their disagreement with the KRA’s argument, as High Court judge Hedwig Ong’udi did not prevent the taxman from collecting revenue based on the old stamps, even as the petition awaits determination.
The Law Society of Kenya (LSK) moved to take the taxman, Treasury, and the Attorney-General to court because the regulations were not subjected to public participation and they were unconventional as they sought to change the price of excise stamps by increasing the cost of the stamps.
The regulatory impact assessment of implementing these regulations had not been presented to the Parliament for consideration as required under Section 11 of the Statutory Instruments Act. It is therefore regarded as unlawful.
According to the LSK, these regulations will end up raising the price of most goods, which will threaten the survival of manufacturers who deal in the sale and distribution of consumable products.
The judge found that these regulations were not only a bias to the petitioner but the public at large, and ruled against implementing them.
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