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Coke wins Sh5.6b tax case against KRA

NEWS
By Kamau Muthoni | July 23rd 2019
By Kamau Muthoni | July 23rd 2019
NEWS
Coca Cola claimed it refunds the deposit to the customers once the crates were returned. [File, Standard]

The Court of Appeal has barred Kenya Revenue Authority (KRA) from demanding Sh5.6 billion in taxes from the international soft drinks manufacturer, The Coca Cola Company.

KRA had claimed that the beverage firm had not paid its excise duty between 2006 and 2008 on returnable crates and empty soda bottles.

However, Court of Appeal judges Wanjiru Karanja, Otieno Odek, Sankale Ole Kantai said the law was vague on whether firms should pay taxes on returnable containers.

“Why would Parliament have expressly excluded the tax on returnable containers before 2004 and re-introduce sub-sections (3)(b) and (d) to again expressly exclude the returnable containers from the tax bracket through Section 5 of the Finance Act No. 10 of 2010?” the judges paused.

“In our view, the exclusion of returnable containers from the ex-factory selling price as per the previous legislations must have appreciated the unique nature of the practice in the industry and the dealing in such containers.”

Coca Cola had previously lost its case at the High Court. According to the taxman, its audit revealed that the number of returnable containers used by Coca Cola subsidiaries – Mount Kenya Bottlers, Rift Valley Bottlers, Nairobi Bottlers, and Kisii Bottlers had their taxes not paid for.

KRA demanded Sh5.621 billion on account of alleged arrears of excise duty, and interests while maintaining that returnable container (bottles and crates) were subject to taxes.

Coca Cola argued that the returnable containers are solely used for packing and distributing liquid soda and remain its property hence they ought not to be subjected to tax as they are not the manufacturers of the said containers.

According to Coca Cola, excise duty ought to include the wrapper of the excisable product. The court heard the deposit paid by the distributors on purchase of the liquid soda was security to ensure that the distributors returned the containers.

The firm argued that imposing an excise tax on the liquid and also on the crates and bottles which were returnable, was subjecting it to multiple taxations over the same products.

KRA argued that tax audits revealed that the returnable containers were sold to distributors, adding that the beverage firm’s invoices showed that ownership passed to the distributors.

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