The High Court has halted a decision by the Kenya Revenue Authority (KRA) to increase excise duty on petroleum products pending determination of a case filed by two Kenyans.
In the order that will negatively affect the government's plan to collect more revenue as it battles soaring debts, the court temporarily quashed KRA’s impending decision to increase excise duty on the products by 4.97 percent, in line with the average annual inflation.
The new taxes were to take effect on October 1. Among the products to be affected were beer, cigarettes, bottled water, juice and energy and alcoholic drinks.
Petroleum products were also be affected but they have been spared for now, thanks to the temporary court order.
While issuing the temporary order, Justice James Makau said the two Kenyans challenging the excise duty have established that they have a strong case against the taxman and with likelihood of success.
"If the interim order is not granted, the petitioners and Kenyans will stand prejudiced. There will be danger to Kenyans in the further increase of fuel prices if KRA adjusts the excise duty rates on October 1 as proposed, although the decision is pending approval by the Cabinet Secretary National Treasury [Ukur Yatani]," said the judge.
He added that the two Kenyans - Isaiah Odando and Wilson Yata - demonstrated that the case is a matter of public interest and that their constitutional rights are under threat of being breached by the government with the increase of taxes.
The judge further noted that the Attorney-General's lawyer, Mitchelle Omuom. was yet to receive instructions on how to oppose the case.
She was representing the Cabinet secretaries for the National Treasury, Energy and Petroleum and Mining.
KRA had opposed granting of the order, terming the application premature because the proposed new taxes are yet to be authourised by the Treasury Cabinet secretary.
The court was also informed that the decision to adjust the excise duty does not end with KRA, since the taxman will, for the first time, be required to get parliamentary approval to effect the new rates. This follows changes to the law that came into effect last year.
But the two citizens stated that the adjusted excise duty rates for petroleum products, as recommended by the commissioner-general of the KRA, will drive up the already high cost of living.
In their case, the two are blaming the National Assembly for the current tax regime, which they say has subjected Kenyans to heavy taxation and is counterproductive to the achievement of economic and social rights.
Through lawyer Kenneth Amondi, they say the government has subjected Kenyans to heavy fuel tax notwithstanding that Kenyans are overburdened, contrary to the basic principles of social justice and their economic interests.
"Parliament has ignored the voice and the delegated sovereign power of the people of Kenya expressed through the National Assembly, contrary to Article 1(3)(a) of the Constitution of Kenya,” the petitioner say.
“It appropriated funds for expenditure by the national government and its other agencies, and the allocation of national revenues without considering that the source of funds is definitely high taxation of the populace.”
They further claim that the government is operating an opaque petroleum subsidy fund which has been receiving funds in billions from the Petroleum Development Levy without disclosing the regulations guiding it.
They are also questioning why the government has not disclosed circumstances under which the Petroleum Development Levy may be used to cushion Kenyans against fuel price hikes.
The case will be mentioned on October 12 to confirm the filing of responses by the KRA.