Court dismisses LSK bid to stop increase taxes on alcohol, cosmetics

Prices of bottled water, alcohol, juices, cosmetics and cigarettes are set to rise after a court threw out a bid to suspend the proposed increase of fees on excise duty stamps.

Justice Hedwig Ong’undi on Tuesday dismissed an application by the Law Society of Kenya (LSK) to bar the Kenya Revenue Authority (KRA) from enforcing the proposed price regulations.

Effect of the part of the regulations -Excise Duty (Excise Goods Management System) (Amendment) Regulations, 2023 -is to adjust and raise the price of excise stamps of the products by up to four times.

The KRA’s proposed regulations will increase the fees of excise stamps for bottled water, juices and any other non-alcoholic drinks, cosmetics, alcoholic beverages, tobacco and nicotine products and export products subject to excise with effect from March 1, 2023.

The higher stamp prices will likely be passed down to the final consumer by producers and importers, similar to other excise charges.

Throwing out the case filed by LSK, Justice Ong’undi said that the dispute was lodged prematurely because the disputed regulations have not been enacted into law.

She added that the regulations are at the public participation stage.

“This court notes that the public notice dated January 17, 2023 issued by KRA on the regulations was a draft. Hence, the same is not yet finalised contrary to the petitioner’s allegations. The process is incomplete despite the contention of petitioners,” Justice Ong’undi stated.

“From a reading of the materials and pleadings, it is clear that public notice does not qualify as publication within the meaning of section 22 of the statutory instruments,” said the judge.

The judge concurred with KRA’s arguments that the making of the regulations is at the consultative stage.

She, however, stated that if KRA gives effect to the disputed regulations on March 1, 2023 or any other date before exhaustion of the entire legislation process, LSK will be at liberty to move to court appropriately.

“I find the application is premature and conservatory orders cannot be granted,” said Justice Ong’undi.

LSK was apprehensive that Kenyans are at risk of purchasing the products at hiked prices and that illicit goods will flood the market if KRA is allowed to implement the proposed regulations.

But the court said that the effective date notwithstanding, the LSK is still at liberty to return to court once the regulations have been properly published.

The KRA’s proposed Excise Duty (Excisable Goods Management System) (Amendment) Regulations, 2023 proposes to raise the stamp fees for cosmetics from 60 cents per stamp to Sh2.50 — a margin of 317 per cent.

The stamp fee for fruit juices and non-alcoholic beverages such as sodas will go up by 267 per cent to Sh2.20 from 60 cents.

The cost of a stamp affixed on a beer bottle will double to Sh3 from Sh1.50, while those for spirits, wines and tobacco products are set for a 79 per cent rise to Sh5 from the current Sh2.80 per stamp.

The fresh prices add to the recent 6.3 per cent adjustment for inflation that came into effect last October and the usual rate revisions contained in the annual budget.

In its case, LSK through its president Eric Theuri, told the court that the adjustment will increase the stamps of beer from Sh1.5 to Sh3 per stamp, wines including fortified ones and spirits exceeding 10 per cent from Sh2.8 to Sh5.0 per stamp.

“No refund mechanism for consumers and manufacturers will lose market share to illicit products. Come March 1, the amendment will take effect and the petition will be rendered nought. Allow the prayers in the application,” said Mr Theuri.

“The said regulations seek to adjust the price of excise stamps applicable to excisable goods by increasing the cost of these stamps, an implementation which threatens the survival of manufacturing businesses engaged in the sale and distribution of consumables as well as other innocent third parties. The increase is neither justified nor rational and only serves to increase the tax burden on manufacturers of excisable products and innocent taxpayers,” LSK added.

It also said that the rationale of issuing excise stamps “as can be gleaned from Regulation 6 of the 2017 Regulations is for purposes of tax administration as opposed to revenue collection which is covered by the imposition of excise duty on excisable goods and services”.

“Therefore the Commissioner-General is arbitrarily imposing the excise stamp fees as a means of revenue collection contrary to the provisions of Article 201 (1) (b) of the Constitution,” it added.

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