Court halts KRA plan to heap food price inflation on Kenyans starting October
The move to increase prices of dozens of goods starting this Friday has been dealt a blow after the High Court barred the taxman from effecting new rate of excise duty in line with uptick in inflation recorded in the year ended June 2021.
Consumers of bottled water, fuel, beer and juice were expected have to dig deeper to pay for the goods, fiurther compounding hard economic times for millions of Kenyans who are smarting from adverse economic fallout sparked by the pandemic.
In line with the Excise Duty Act 2015, the Kenya Revenue Authority (KRA) is required by law to review the specific rates of excise duty of select excisable products to reflect the average inflation rate for the previous financial year.
High Court Judge James Makau on Monday issued a temporary freeze on the KRA’s plan, saying that the case contesting implementation of the new taxes has a chance of success.
In rolling out this measure, the affected manufacturers of the goods usually pass on the rise in costs to the final consumer.
Kenya’s rate of inflation for the year ended June averages 4.97 per cent, representing a jump from 4.93 per cent recorded in the previous year reflecting the surging cost of living in the country.
“Kenya Revenue Authority would, therefore, like to inform manufacturers and importers of excisable goods falling under the specific rate category and members of the public that the commissioner general will adjust the rates of excise duty using the average inflation rate for the Financial Year 2020/2021 of four decimal nine seven per centum (4.97 per cent), as determined by the Kenya National Bureau of Statistics (KNBS). The adjusted rates will be effective from 1st October, 2021,” KRA said earlier in a notice to the public.
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This year, however, the taxman was expected to get a nod from Parliament before hitting the manufacturers or importers of affected excisable goods with the new rates.
In the past, KRA would simply issue a legal notice stating the adjustment for the new tax to become effective starting October.
In the new excise regime, Kenyan consumers were to pay Kes5.77 more for a litre of beer while takers of spirits were to be set back Kes13.20 for a similar volume of the drink.
The High Court of Kenya has, however, granted temporary orders blocking KRA from implementing inflation adjustments to the rate of excise duty on fuel products starting this Friday.
“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,” said Justice Makau.
The relief to millions of consumers came after two petitioners-Isaiah Odando and Wilson Yata-last week sought orders challenging the runaway cost of fuel prices in the country.
Devoid of the High Court orders, prices of fuel were expected to soar with a litre of petrol jumping by Kes1.09, earning the exchequer Kes23.04 in excise duty on the fuel while diesel and kerosene prices will each go up by roughly Kes0.566 per litre.
At the moment, fuel prices in Kenya are at historic high a move that has jolted Parliament to consider dropping VAT charge on the commodity.
The National Assembly Finance and National Planning Committee is organizing public participation of the petition to drop the taxes on Tuesday, September 28.
In the latest review, fuel prices went up sharply after the Treasury dropped Kes7.10 subsidies on super petrol, Kes9.89 on diesel, and Kes11.36 on Kerosene sending the commodities to historic high with a litre of super petrol retailing at Kes134.72, diesel (Kes115.60) while Kerosene, which is used by millions of poor households is costing Kes110.82 per litre in Nairobi.
In the past, manufacturers affected by the inflation price adjustment have complained, arguing that the move sparks price instability as well as dents overall rate of inflation.
