A raft of controversial taxes Treasury imposed through an alternative legislation pending enactment of the Finance Bill, 2018 are illegal, a court has ruled.
Those affected are tariffs on mobile money transfers, kerosene and bottled water that were to be collected for six months prior to Parliament's approval and presidential assent to the Finance Bill, 2018.
Justice Winfrida Okwany ruled that a Bill cannot be implemented until it is processed to an Act of Parliament.
"A declaration that Finance Bill, or any other parts or provisions thereof, including on taxation, cannot be implemented before the Bill becomes the Finance Act after it goes through the parliamentary legislative process laid out in the Constitution for approval and adoption by Parliament, and assent by President,” ruled Justice Okwany.
In June, Treasury Cabinet Secretary Henry Rotich published a legal notice indicating that he would use the Provisional Collection of Taxes and Duties Act of 2018 to enforce part of the Finance Bill.
Kenyans were to start paying for the listed items from last July 1.
But activist Okiya Omtatah sought stay orders, suing Rotich, the Kenya Revenue Authority, the Attorney General and National Assembly.
Mobile money was to attract a 12 per cent excise tax, up from the previous 10 per cent, while KRA would collect Sh10.31 tax from a litre of kerosene from the previous year’s tax of Sh7.21.
Large vehicles would attract a 10 per cent additional excise duty, 20 per cent demurrage duty on foreign ships and five per cent capital gain tax.
The notice was meant to cushion the taxman from failing to hit the set collection target due to delays in passing the Finance Bill.
Rotich urged the court to dismiss the case filed by Mr Omtatah, saying stopping collection of taxes would halt Government activities.
But Justice Okwany said Parliament had powers to authorise withdrawal of money from the Consolidated Fund to facilitate Government business until such a time the Appropriation Act was assented to.
The judge, however, clarified that the case was not about the constitutionality of the Finance Bill but its implementation on provisional basis before being passed into law.
It also emerged that the CS had not consulted when he decided to implement the taxes.
Justice Okwany noted that although Rotich had argued that public participation was fulfilled through engaging MPs, he did not present any evidence or minutes showing that there was consultation.
“The dangers of implementing a Bill that has not come into law becomes more prominent when one considers that such a Bill had not, at the time of implementation, been subjected to public participation,” the judge ruled
Register to advertise your products & services on our classifieds website Digger.co.ke and enjoy one month subscription free of charge and 3 free ads on the Standard newspaper.