The High Court of Kenya has struck out a petition filed by the Law Society of Kenya (LSK) against the implementation of higher excise stamp fees. The fees, which were introduced to partly cover a Sh4.5 billion debt owed to the stamp system contractor, affect various products including beer, spirits, cigarettes, and cosmetics. The court's decision was based on the fact that LSK filed its case before Parliament completed its scrutiny of the 2023 regulations.
The dispute centered on the increased costs of excise stamps, which manufacturers and importers pay according to the number of stamps issued. The Kenya Revenue Authority (KRA) had not changed the fees since 2017, despite inflation, a weaker shilling against the euro, and a shift towards cheaper products that affected the system's finances. The revised charges aimed to cover the cost of stamps and help clear the debt owed to Swiss firm SICPA, which supplied the stamps under a system contract signed in 2015.
The proposed fee on beer bottles doubled from Sh1.50 to Sh3, while that on cosmetics stamps rose more than threefold to Sh2.50 each. LSK sued, arguing that the changes were introduced unlawfully and would increase costs for manufacturers and consumers. The society claimed that public participation was inadequate and that the regulations were published and enforced before the required process was complete.
LSK argued that stamp charges were intended to administer tax compliance, not raise revenue, and that the increase unfairly burdened businesses and consumers. The society asked the court to invalidate Legal Notice No. 30 of 2023 and stop KRA from enforcing it. However, KRA defended the changes, saying stamp fees had remained unchanged since 2017, while inflation, currency depreciation, and shifts towards cheaper products had undermined the system's finances.
KRA said the containment measures introduced in 2020 due to the Covid-19 pandemic disproportionately affected sales of high-priced excisable products, while sales of low-priced products were largely unaffected. Depreciation of the shilling against the euro also added to the challenges. The authority said it published a public notice on January 17, 2023, invited comments, and held a stakeholder meeting on February 1, receiving submissions from various companies and organizations.
The National Assembly's Committee on Delegated Legislation had not completed its review when LSK filed the case. The Treasury Cabinet Secretary and the Attorney-General filed no responses. In its judgment, the court emphasized that the committee had to assess constitutional compliance, rights, and public participation. The court held that LSK "jumped the gun" by seeking a court decision before Parliament completed its work.
The court's decision implies that the increased excise stamp fees will remain in effect, pending parliamentary scrutiny. The fees are expected to generate sufficient revenue to meet the cost of excise stamps and offset the outstanding Sh4.5 billion debt to SICPA. The KRA's move aims to ensure the sustainability of the excise stamp system, which helps identify genuine goods, track products, and support excise duty enforcement.
Key points
- The High Court of Kenya has dismissed a Law Society of Kenya petition challenging increased excise stamp fees.
- The fees were introduced to partly cover a Sh4.5 billion debt owed to the stamp system contractor.
- The court's decision was based on the fact that LSK filed its case before Parliament completed its scrutiny of the 2023 regulations.
