East African court suspends 25 per cent tax on imported glass bottles

A regional court has suspended Kenya’s decision to impose a 25 per cent tax on imported glass bottles. The East African Court of Justice (EACJ) order follows an application in which Tanzania’s Kioo Limited claimed the Kenya government’s decision amounts to discrimination of their products against those manufactured in Kenya.

The court said its interim orders bar the Kenya Revenue Authority (KRA) from collecting extra excise duty from the Tanzanian company that manufactures container glass bottles for soft drinks, alcohol and food, pending the hearing and determination of the case.

EACJ judges Monica Mugenyi, Audace Ngiye and Charles Nyachae pointed out that their decision does not reverse application of the impugned law, but was a suspension of its application to the company.

They said the Kenyan government would suffer less injury in being temporarily restrained from collecting excise duty from Kioo Limited.

“It would thus appear that justice lies in the protection of the applicant from expenses that would have an exponential bearing on its business operations yet might not be readily recoverable from KRA, an institution of the respondent,” reads part of the judgement delivered on November 27.

The judges said the company’s case raises serious issues that pose plausible grounds for granting the interim orders.

The judges said the said issues call for a determination of non-discriminatory safeguard measures within the letter and spirit of the Treaty, Customs Union and Common Market protocols.

The Kenyan government has imposed the tax through the Business Laws (Amendment) Act 2020, a law that amended the Kenya Excise Duty Act 2015 on the imported glass. The law was to take effect on March 18.

Kioo Limited argued that the law does not grant exemptions to goods imported into the Kenyan market from the East African Community (EAC) member states, thus amounts to discrimination.

In its application seeking orders to stop KRA from collecting the tax from it and in which General Kihara Kariuki has been named as a respondent, the company told the court sitting in Arusha, Tanzania, that the new tax renders their glass products uncompetitive in the Kenyan market.

It said in the absence of orders sought, it stood to suffer an irreparable injury with the likelihood of diminished business and loss of market share due to additional financial cost that would be passed to consumers leading to reduced demand for its products.

 “The company was likely to suffer an unquantifiable reputational injury which would erode its business goodwill built over 50 years thus occasioning a reduction in its market outreach,” documents filed in court read.

National Treasury Principal Secretary Julius Muia opposed the application saying the new tax was meant to safeguard the domestic glass manufacturing industry by containing effects of cheap imports to spur the growth of the local economy.