A Nairobi advocate has moved to court to stop the implementation of the new Finance Act arguing that the law was passed in the middle of an ongoing case stopping the government from increasing excise duty on products including beer and other alcoholic drinks.
Mwaura Kabata says consumers and manufacturers as well as business owners are set to suffer financially by the heightened tax pressure, which is based on increments of tax from a base of rates that are actively being contested before the court.
The lawyer says Finance Act which came into effect on July 1 introduced and increase excise duty on a raft of goods and services which will automatically increase the tax burden.
The Act saw spirits like whisky, gin and rum hit with duty per litre climbing 20.31 percent to Sh335.30, after Parliament rejected a recommendation by Finance and Planning Committee to spare alcohol from higher taxes this fiscal year.
Duty on beer also went up by 9.97 percent to Sh134 per litre, wines by 9.99 percent to Sh229 per litre, while fruit and vegetable juices will increase 9.29 percent to Sh13.30.
Mr Kabata says in the petition that section 35 of the Act brought new rates whose implementation touches on the subject matter of the ongoing case. “The Finance Act thus stems from an event of illegality from its onset,” he says in a sworn statement.
He says the Kenya Revenue Authority (KRA) was barred by the High Court last year from raising the duty charged on the products, including bottled water, juice, motorcycles and beer, by 4.97 percent to cover the inflationary erosion of collected taxes.
The court heard that the retail cost of products in the Act will increase exponentially high leading to diminished returns for business owners in the manufacturing sector and increase costs of products.
“Consumers and manufacturers, as well as business owners, are thereby set to suffer financially by the heightened tax pressure which stems from an event of illegality in enacting the law and if not checked, the respondents are bound to run away with disobedience of just law will in course to drive businesses down the drain,” he added.
He further says that all agreements, deliberations, reports and opinions of stakeholders that were settled upon in the first and second committee meetings, were not incorporated in the Act.