The flower industry is set to close the year on a positive note after it won the first round of its many battles with devolved units over collection of cess.
Last week, the High Court issued a permanent order barring Meru County government from collecting cess for fresh cut flowers meant for export in a case filed by the Kenya Flower Council (KFC).
Justice Francis Gikonyo said the order will remain force “until proper mechanism of collection and harmonisation of cess is reached, through consultation of stakeholders.”
The KFC, which sees cess as a form of double tax, has been fighting in courts to have the levy scrapped since the days of the defunct local authorities such as Naivasha and Nakuru county councils.
In the decision delivered in Meru last week, Justice Gikonyo said the action by Meru Government in which it has been stopping the movement of trucks loaded with floricultural products, was unconstitutional.
KFC argued that the law passed by the county, relating to cess amount on fresh cut flowers was inconsistent with the Constitution and Section 132 of the Public Finance Management Act 2012.
The court heard the county had passed a law- Meru County Finance Act 2014 without their involvement, yet it imposed a levy of Sh30 per carton of fresh cut flowers.
The council argued that the law was passed without any consultation and public participation of stakeholders and that it was not clear what carton the Sh30 applied because there are different types, sizes and weight of cartons based on the type, quality and destination of flowers for export.
The council said without the involvement of expertise views there exist loopholes and uncertainties in the implementation of collection of Cess Tax by the county.
The court further heard that the intended action will have adverse effect on KFC’s members for once the products are packed, they cannot be reopened, as they may not be exported as per the rules and procedure for export, once re-opened.
The council further said they remit export cess tax to Horticultural Crops Development Authority (HCDA) at the rate of Sh0.30 per kilogramme. And it would be prudent for the County to first consult and harmonize the cess tax with what members pay to HCDA to avoid duplication or over taxation.
The court further said such harmonization was necessary because the proposed rate by the county was about 850 percent more than the existing rate charged by HCDA, a move they termed as a drastic increase.
In defence, the county said they ensured that there was public participation before the proposed finance bill was enacted into law.
According to Governor Kiraitu Murungi’s government, invitations were made through the local FM stations and Daily Nation. And the failure by KFC to attend and participate in public forums upon sufficient invitation, should only be blamed on them and not the county.
The county further stated that they together with KFC’s representatives agreed on a system on where 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 the judgement, Justice Gikonyo said public participation should never be treated as mere formality, but as 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.
He added that legislation which imposes taxes and levies for the county governments carry greater burden in ensuring that sufficient public awareness of the intended law and its contents is conducted so as to ensure satisfactory public participation.
According to the Judge, one advertisement in the local daily newspaper and vernacular radio station was not enough considering the law in question is on imposition of taxes and charges.
“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.
He added that there was absolute necessity of a mechanism that does not produce unnecessary duplication of taxes and one that averts creation of unduly heavy burden of taxation on particular category of taxpayers.