Some of BAT products in Kenya. The company has won the first round in
what promises to be a bruising tax battle against the Ugandan
government. FILE PHOTO | NMG
Cigarette maker British American Tobacco (BAT) has won the first
round in what promises to be a bruising tax battle against the Ugandan
government.
The East African Court of Justice (EACJ)
has issued an interim order stopping the Uganda Revenue Authority (URA)
from imposing excise duties on BAT cigarette imports from Kenya.
The
company in August last year filed a case at EACJ, claiming that new
excise taxes imposed on cigarettes imported from Kenya into Uganda were
discriminatory and in contravention of regional customs regulations.
BAT
later sought interim orders to have the excise duties stopped pending a
decision on the case, and on January 25 the EACJ obliged.
Discriminatory
BAT
argues that a 2017 amendment to Ugandan law which imposes duties on
manufactured imports from Kenya is discriminatory and in contravention
of the East African Community (EAC) treaty.
The company says that by being forced to pay taxes for
cigarettes manufactured in Kenya but sold in Uganda, it would suffer
irreparable harm to its bottom line and its reputation.
“If
the cost were passed on to the company’s consumers the unit price
increase would cause a 17 (per cent) market share loss, rendering the
business unviable especially given more favourable prices,” BAT argued
in submissions to the court.
The Ugandan government argued the amendments to the law had been passed duly by the country’s legislature.
Protective action
The
country further said that this law was in keeping with similar
protective action from its neighbours and questioned that BAT would
suffer irreparable harm that could not be compensated through damages
paid.
EACJ found that BAT had presented a triable case
and that the company was “liable to suffer business disruption, as well
as reputational injury and loss of goodwill” and therefore ordered the
URA to stop collecting the taxes.
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