The High Court on 12th March, 2018 dashed the Kenya Revenue Authority’s (K.R.A) plans to broaden tax compliance in the country by quashing the decision to impose excise duty tax on bottled water, non-alcoholic drinks and cosmetics.
The new tax would have required manufacturers to affix new generation excise stamps on their commodities using the Excise Goods Management System (EGMS).
In delivering the judgment, the Court found that there was insufficient public participation both in the decision to acquire and implement the EGMS as both manufacturers and consumers, would have faced additional financial burdens and should therefore have been consulted. The Court held that Article 10 (2)(a) of the Constitution which places public participation among the national values and principles of governance was violated.
The Court also found that the intended tax would infringe on Kenyan citizens’ economic and social constitutional rights through limiting access to clean and safe water in adequate quantities without justification.
The tender to supply the EGMS, which had been awarded to a Swiss firm SICPA Securities, was also quashed for violating the laws relating to direct procurement.
K.R.A had argued that the tender was an extension of a previous contract, which would have justified their decision to opt for direct procurement. The Court disagreed, noting there was no evidence brought to support that claim. There was also inadequate public participation and stakeholder engagement in the tendering.
The decision serves as a cautionary tale to State agencies and corporations to be mindful of the Constitution and statutes in implementing their policies lest they be challenged and overturned by the Courts.
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