Relief for consumers after court quashes tax on non-alcoholic drinks over lack of public participation

The Kenyan consumers have been saved from paying Sh3.6 billion annually after the High Court declared the planned levying of Excise Duty on bottled water, juices, soda, other non-alcoholic beverages and cosmetics unconstitutional.

Justice John Mativo issued the quashing orders after he found that the Kenya Revenue Authority (KRA) and the National Treasury had not complied with the requirement of public participation and did not involve stakeholders before rolling out the tax.

“An order of certiorari be and is hereby issued quashing Legal Notice Number 53 of March 30, 2017 to the extent that it seeks to impose or introduce excise duty on bottled water, juices, soda and other Non-Alcoholic Beverages and Cosmetics,” the judge ruled.

The Court agreed with activist Okiya Omtatah who had moved to court and sued KRA over the tax arguing that the agency and Treasury secretary Henry Rotich had issued an irregular Gazette notice establishing Excise duty without public participation and consultation of other stakeholders.

Mr Omtatah argued that the duty, which would have pushed the total tax on a litre of water to at least Sh5.5 was burdensome to consumers.

He further questioned the award of the tender for the supply of Excisable Goods Management System (EGMS) to Switzerland-based firm SICPA Securities without subjecting it to competitive procurement.

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A clause in the tender documents that requires manufacturers of excisable goods to pay SICPA Sh1.50 for every stamp attached to each item – earning the Swiss firm billions of shillings annually.

Justice Mativo also quashed the award of the Sh17 billion ($170m) five- year EGMS contract to SICPA Securities for the supply of the system that facilitates collection of the tax handing.

The court found out that the only evidence of public participation that the taxman produced were two boardroom meetings in Nairobi with no indication as to what happened in the remaining 46 counties.

KRA was to roll out the new tax, which required manufacturers and importers to affix the new generation excise stamps on bottled water, juices, soda, energy drinks, other non-alcoholic beverages, food supplements and cosmetics from November 1 but the court suspended the roll-out pending hearing and determination Mr Omtatah’s petition.

The court agreed with Mr Omtatah in its finding that there is need to ensure water is not only available and accessible, but also affordable to rich and poor alike.