Government appeals ruling on bottled drinks tax

The government wants a decision of the High Court quashing a Gazette notice that imposed excise duty on imported bottled water and other non-alcoholic drinks overturned. It argues that Kenya Revenue Authority risks losing more than Sh27.68 billion in the current financial year.

While arguing for suspension of the decision pending an appeal, Treasury Cabinet Secretary Henry Rotich said besides losing revenue targets, the gains made in the fight against illicit trade in tobacco and alcoholic products risks being reversed.

In an affidavit filed in the Court of Appeal, the CS further said High Court Judge John Mativo, who quashed the duty and tender, did not appreciate that the integrated control and tracking system known as the Excisable Goods Management System, is an information technology tool for tracking, tracing and accounting for all execisable goods and duty.

PRODUCTION LINE

The e-tax system affixes a stamp to track and trace each bottle or package coming off a production line.

 The CS, through State counsel Emmanuel Bita, told justices Asike Makhandia, Kathurima M’Inoti and Fatuma Sichale that the order has a devastating effect on revenue collection.

KRA said it has seized illicit goods worth over Sh13 million, and that the gains made might be reversed. The taxman further said that SICPA Securities Sol SA of Switzerland, which won the tender for the supply of the software, has spent a lot of money in the process.

Senior Counsel Paul Muite told the judges there is imminent danger of uninstalling and scrapping the technology, which is likely to cause great financial loss to the company. He urged the court to suspend the decision pending the appeal.

SECURITY

Justice Mativo quashed the Sh4.8 billion tender for supply of security printed revenue stamps, track and trace software in March, stating that there was no meaningful public participation in the process and stakeholder engagement.

Activist Okiya Omtatah moved to court last year arguing that KRA had published a notice on October 3, 2017 on excise stamps on bottled water, juices, soda, other non-alcoholic beverages and cosmetics. The duty was to take effect from November 1, 2017.

Mr Rotich had argued that the State had before relied on a manual method of affixing excise and revenue stamps on excisable goods that was only limited to tobacco, wines, spirits, and beer, but there was rampant counterfeiting of stamps that led to under-declaring volumes by manufacturers. The judges will rule on the matter on May 11.