In a case filed by the Kenya Flower Council (KFC) against the Meru County government, the Meru High Court has issued a permanent order barring the Meru County government from collecting Cess Tax for fresh cut flowers designated for export.
In the case KFC argued that Cess Tax is a form of double taxation as the council already remits export Cess tax to Horticultural Crops Development Authority (HCDA). Therefore, KFC opined that it would have been prudent for the County to first consult and harmonize the Cess tax with what members pay to HCDA to avoid duplication or over taxation. They stated that such harmonization was necessary in Meru county because the proposed rate by the county was about 850% more than the existing rates of Ksh 0.30 per kilogram.
Moreover, the court heard that the recent implemented county government law -The Meru County Finance Act 2014- was done without any consultation and public participation involving all the relevant stakeholders. Thus, KFC was of the stand that without expert views, loopholes and uncertainties in the implementation and collection of Cess Tax by the county were bound to happen. This law imposed the Cess Tax at the rate of Ksh 30 per carton of fresh cut flowers.
Consequently, KFC averred that this new law was not only inconsistent with the constitution but also in contravention of Section 132 of the Public Finance Management Act.
KFC argued that the tax was not well defined as it was uncertain with regards to the clarity of which carton the Ksh. 30 would be applied to because different types, sizes and weight of cartons varied based on the type, quality or destination of flowers for export. Furthermore, the council was of view that the intended action would have adverse effect on its members as once the perishables were packed, then they could not be reopened since they would not be fit for export as the rules and procedures regulating exportation proscribed re-opening of perishable packages.
In their defence, the county claimed that they ensured there was adequate public participation before the proposed finance bill was enacted into law. According to the county government, invitations for public participation had been made through local radio stations and the Daily Nation newspaper. The county argued that failure by KFC to attend and participate in the public forums upon sufficient invitation was the councils own undoing and not the county.
The county also stated that they had arrived at an agreement with senior KFC representatives whereby a system was made such that its officers would be verifying the number of cartons in each of their trucks (which would be located less than a kilometer away from the members’ farms).
In rendering the judgment, Hon Justice Francis Gikonyo issued a permanent order restraining Cess Tax collection across Meru County until a proper mechanism of collection and harmonization of the Cess Tax had been reached through consultation with all stakeholders. Furthermore, he stated that the action by Meru County government to stop the movement of trucks loaded with horticultural products was unconstitutional.
On the issue of public participation, Justice Gikonyo averred that public participation should never be treated as mere formality he insisted that publiv participation should be a substantive principle of governance which should be adhered to with utmost seriousness.
“Thus, any process employed to facilitate public participation must be real-time, efficient, effective, comprehensive and measurable,” he said.
The judge further asserted that laws imposing taxes and levies for the county government carried greater burden in ensuring that sufficient public awareness of the intended law and its contents is conducted so as to ensure satisfactory public participation. Hence, one advertisement in a local daily newspaper and a vernacular radio station was not enough considering the law in question concerned imposition of taxes and charges which would affect the public directly.
He finally declared that it was of necessity that taxation systems to avoid duplication of taxes and creation of unduly heavy burden on particular category of taxpayers.
“The constitution is alive to the fact that the burden of taxation should be shared fairly, as the national and county government raise revenue through imposition of taxes and charges. This is to avoid double taxation or creating a heavier burden of taxation on concerned taxpayers,” the Judge said.
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