The Law Society of Kenya (LSK) has gone to court to contest the introduction of the 15% excise duty on telephone and internet data services through the Finance Act 2018. They are also contesting 5 more taxes introduced in the act.
LSK contends that sections 13, 32 (b) (ii), 32 (b) (iv), 50, 85 & 86 of the Finance Act 2018 were added when the Finance Bill was sent back to Parliament by the President. The Presidents had sent them back in a memorandum as recommendations and they were then added to the bill which was passed on 20th September 2018 and assented to by the President on 21st September 2018.
LSK argues that the President acted in violation of Article 1, 10, 11(b) and 201 of the constitution by making reservations and recommendations on issues that were not in the Bill initially forwarded to him for assent. They also put forward that the National Assembly acted in violation of Articles 1, 10, 115 and 118 by voting on and passing the sections in contention which were introduced by the President without subjecting them to Public Participation.
LSK wants conservatory orders suspending the implementation of the 6 sections pending the determination of the case. They want the 6 sections declared unconstitutional.
The specific sections are:
13. Section 5 of the Value Added Tax Act, 2013 is amended in subsection (2) by inserting the following new paragraph immediately after paragraph (a)-(aa) in the case of goods listed in section B of Part I of the First Schedule, eight percent of the taxable value, effective from the date of assent:
32 (b) (ii) by deleting paragraph 1 and substituting therefore the following new paragraph—
1. Telephone and internet data services shall be charged excise duty at a rate of fifteen percent
of their excisable value.
(ii) by deleting paragraph 2 and substituting
therefor the following new paragraph —
32. (b) (iv) by deleting paragraph 4 of the Act and substituting therefor the following new
4. Excise duty on other fees charged by financial institutions shall be twenty percent of their excisable value.
50. The Miscellaneous, Fees and Levies Act, 2016 is amended by inserting the following new section 8A
immediately after section 8-
Anti-adulteration levy. 8A.
(1) There shall be paid a levy to be known as the antiadulteration levy, on all illuminating kerosene imported into the country for home use.
(2) The levy shall be at the rate of eighteen shillings per litre of the customs value of the
illuminating kerosene and shall be paid by the importer at the time of entering the illuminating
kerosene into the country.
85. The Employment Act, 2007 is amended in section 2 by inserting the following new definitions in the proper alphabetical sequence-
“employer contribution” means the employer’s
contribution payable into the National Housing
“employee contribution” means a contribution payable
under this Act for his or her benefit;
“employee earnings” means the taxable amount
determined under the Income Tax Act for purposes of
levying income tax on the employee emoluments.
“National Housing Development Fund” means to the
Fund established under section 6 of the Housing Act.
86.The Employment Act, 2007 is amended by inserting the following new section immediately after
31A. (1) An employer shall pay to the National Housing Development Fund in respect of each employee—
(a) the employer’s contribution at one point five per centum of theemployee’s monthly basic salary;
(b) the employee’s contribution at one point five per centum of the monthly basic employee’s salary:
Provided that the sum of the employer and employee contributions shall not exceed five thousand shillings a month.
(2) The benefits to an employee shall accrue as follows –
(a) for employees who qualify for affordable housing, the contributions accrue to the employee and shall be used to finance the purchase of a home under the affordable housing scheme; or
(b) for employees who are not eligible for affordable housing, upon the expiry of fifteen years from the date of the start of making the contributions, or after the attainment of retirement age, whichever is sooner─
(i) a transfer of their contributions to a pension scheme registered with the Retirement Benefits
(ii) a transfer their contributions to any person registered and eligible for affordable housing
under the National Housing Development Fund; or
(iii) a transfer of their contributions to their spouse or dependent children; or
(iv) to receive their contributions
Provided that contributions paid out in cash shall be included in the contributor’s taxable income for the year and be subjected to tax at the prevailing rates.
(3) All contributions shall get a return based on the return on the Fund.
(4) The employer shall remit both employee and employer contributions to the National Housing Development Fund before the ninth day of the following month.
(5) If the contributions due under this section are not paid on or before the day on which the payments are due, a penalty of five percent of the contributions shall be payable by the employer for each month or part thereof during which the contributions remains unpaid, and any such penalties shall be recoverable as a sum due and payable to the National Housing Development Fund.
(6) This section shall become effective upon the gazettement of regulations prescribing the requirements for qualification to the scheme by the Cabinet Secretary responsible for housing in consultation with the Cabinet Secretary responsible for finance