KAM Kenya: Industrial Sugar Excise Duty Challenge at High Court

• The Kenya Association of Manufacturers (KAM) has filed a constitutional petition at the Milimani High Court challenging a 433% increase in excise duty on imported industrial sugar.
• The tax, effective July 1, 2026, raised the duty from Sh7.50 to Sh40 per kilogram under the Finance Act, 2026.
• KAM argues the increase lacked adequate public participation and will raise production costs, threaten jobs, and reduce competitiveness.
• Manufacturers could face an additional Sh6 billion in annual costs, with up to 3,000 jobs at risk and capacity utilization potentially falling by 50%.
• The High Court certified the application as urgent on October 7, with a mention scheduled for October 15 to confirm compliance and issue further directions.

The 433% industrial sugar tax increase Kenya faces is projected to have profound economic repercussions for the nation's manufacturing sector.

The Kenya Association of Manufacturers (KAM) has initiated a legal challenge against a substantial increase in excise duty applied to imported industrial sugar. This action, filed as a constitutional petition at the Milimani High Court, targets the State Law Office, the Kenya Revenue Authority (KRA), and two additional respondents. The core of the dispute revolves around a 433% surge in the industrial sugar tax, which saw the duty rate climb from Sh7.50 per kilogram to Sh40 per kilogram, becoming effective on July 1, 2026. This significant adjustment was implemented under the provisions of the Finance Act, 2026.

KAM asserts that this drastic increase directly impacts manufacturers who rely on industrial sugar as a crucial input for their production processes. The association has voiced concerns that the elevated tax will inevitably lead to higher production expenses, potentially jeopardizing employment opportunities and diminishing the competitive standing of local industries. The petition underscores the severity of the situation for businesses reliant on imported industrial sugar, highlighting the potential for widespread negative consequences across the manufacturing sector in Kenya.

The legal basis for KAM's petition extends beyond the sheer magnitude of the tax increase, focusing critically on the process through which the new rate was introduced. The association contends that there was insufficient public participation prior to the implementation of this significant tax adjustment, a key argument in its challenge against the Finance Act 2026 excise duty petition. This procedural flaw forms a central pillar of the constitutional petition, suggesting a potential breach of due process in tax legislation.

The Milimani High Court has acknowledged the urgency of the matter. On October 7, the court certified KAM's application as urgent, with Justice David Mburu issuing specific directives. The Kenya Association of Manufacturers was instructed to serve the petition, the accompanying application, and the court's directions to all respondents by the close of business on October 8. Subsequently, the respondents were granted a seven-day period from the date of service to file and serve their respective responses. A mention date has been set for October 15, at which point the court will confirm compliance with its orders and provide further guidance on the proceedings.

The 433% industrial sugar tax increase Kenya faces is projected to have profound economic repercussions for the nation's manufacturing sector. KAM estimates that the combined taxes and levies on imported industrial sugar now constitute approximately 90 percent of its Cost, Insurance, and Freight (CIF) value. This substantial burden is anticipated to impose an additional Sh6 billion in annual costs on manufacturers, a figure that could severely strain operational budgets.

Furthermore, the association warns of a potential decline in capacity utilization by as much as 50 percent, which could lead to the loss of around 3,000 jobs. Beyond domestic concerns, the Kenya Association of Manufacturers sugar tax challenge also highlights issues of regional competitiveness. Kenyan manufacturers, already under pressure to manage input costs while vying for markets within the East African Community (EAC), could find themselves at a significant disadvantage compared to their counterparts in Uganda and Tanzania, where industrial sugar reportedly does not attract a similar excise duty. This disparity could impact pricing strategies and the overall ability of Kenyan firms to compete effectively in the region.

Lawyers advising manufacturing clients in Kenya, particularly those reliant on imported industrial sugar, must closely monitor the outcome of this constitutional petition. The ruling will determine significant tax liabilities and operational costs for these businesses, and could set a precedent for challenges to future tax increases under the Finance Act based on public participation arguments.

Source: Original reporting via AllAfrica