The Kenya Revenue Authority (KRA) has suffered a blow after the High Court extended an order barring increase in excise duty on petroleum products.
Justice Anthony Mrima ruled that it was right to maintain status quo by not adjusting the rates upwards in line with the cost of living.
“As the petitioners have established a prima facie case, it will be unfair to the citizens of this country for this court to allow the introduction and levying of the impugned taxes since the citizens will not be able to recover such payments in the event the Petition is successful,” Justice Mrima said.
“Conversely, in the event the Petition is unsuccessful, the State still has the machinery to raise more taxes.”
The judge said it can only be prudent that the petition be first heard to determine whether the intended taxes are within the permissible constitutional and legal limits since Kenyans are currently struggling under the negative impacts of Covid-19 pandemic.
“This court is also alive to the fact that the State has the ability to re-adjust its budgetary allocations and projections further to seeking foreign aid and borrowings,” the judge said.
The court barred the National Treasury from considering or approving KRA’s decision to adjust excise duty rates for petroleum products.
Additionally, he said it would be difficult for Kenyans to recover the money in case KRA losses the matter.
The judgement comes after two Kenyans petitioned the court to stop KRA from the adjustment, arguing that it would put pressure on the cost of living.
The adjustment was to come into effect in October last year but it was suspended temporarily.
KRA had opposed the petition arguing that inflation adjustment is based on revenue projections as prepared by the National Treasury Revenue Framework and Budget Policy Statement in order to meet the revenue requirements.
The High Court judge James Makau had issued temporary orders in October last year, barring KRA from increasing excise duty on the products by 4.97 per cent in line with average annual inflation.
