Treasury CS Rotich appeals excise tax judgment

Mr Henry Rotich, Treasury secretary. file photo | nmg 

By SAM KIPLAGAT

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Summary

• Henry Rotich argues that the lower court’s decision to nullify the gazette notice that authorised use of Excisable Goods Management System (EGMS) to collect the tax would cause loss of Sh27.68 billion in tax revenues in the current financial year.
• He further argues that High Court judge John Mativo did not appreciate that the integrated control and tracking system known as the Excisable Goods Management System (EGMS), is an information technology tool for tracking, tracing and accounting for all exercisable goods and duty.
• The e-tax system affixes a stamp to track and trace each bottle or package coming off a production line.

Treasury secretary Henry Rotich has moved to the appeals court for orders to overturn the High Court decision that stopped use of an imported electronic system to charge excise duty on imported bottled water and other non-alcoholic drinks.

Mr Rotich argues that the lower court’s decision to nullify the gazette notice that authorised use of Excisable Goods Management System (EGMS) to collect the tax would cause loss of Sh27.68 billion in tax revenues in the current financial year.

The minister, who is seeking suspension of the decision while his appeal is heard reckons that besides causing the Kenya Revenue Authority (KRA) to miss its revenue targets, the decision amounts to a reversal of the gains made in the fight against trade in illicit tobacco and alcoholic products.

Mr Rotich further argues that High Court judge John Mativo did not appreciate that the integrated control and tracking system known as the Excisable Goods Management System (EGMS), is an information technology tool for tracking, tracing and accounting for all exercisable goods and duty.

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

Mr Rotich, through state counsel, told Justices Asike Makhandia, Kathurima M’Inoti and Fatuma Sichale that the order has had a devastating effect on revenue collection.

KRA has previously reported that the system had helped it to seize more than 13 million illicit goods and that quashing its use would amount to reversing the the gains made.

The taxman further argues that SICPA Securities Sol SA of Switzerland, which won the tender for supply of the software, has spent a lot of money on the job, a process that started in 2013.

READ: KRA suffers hit as consumers spared bottled water tax

Senior Counsel Paul Muite, who is representing the Swiss firm, told the judges that there is imminent danger of uninstalling and scrapping the technology and, which is likely to cause the supplier great financial loss and urged the court to suspend the decision, pending the appeal.

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

“Considering the above constitutional and statutory dictates, I expressly find that public participation must apply to enactment of all legislations and policy decisions through the degree and form of such participation will depend on the peculiar circumstances of the case,” the Judge said.

Activist Okiya Omtatah had filed a petition challenging award of the tender on grounds that it was not done according to the Kenyan Constitution and relevant laws.

KRA had on October 3, 2017 published a notice signalling use of excise stamps on bottled water, juices, soda, other non-alcoholic beverages and cosmetics.

The tax was to take effect on November 1, 2017 when all affected goods manufactured or imported would be affixed with excise stamps in accordance with the regulations.