Attorney General Githu Muigai Advises KRA to Impose Taxes on Sewerage

Kenyans will have to bear the burden of higher water prices if advice issued by Attorney General Githu Muigai is adopted.

A consumer currently paying a water bill of Sh1000 will have to pay up to Sh120 more as tax for sewerage services. 

Prof Muigai offered legal advice on a matter between the Kenya Revenue Authority (KRA) and the Water Services Regulatory Board (WASREB).

WASREB had rejected the KRA's demand that sewerage fees, which form 75% of every water bill, be charged 16% Value Added Tax (VAT).

The water board had argued that the provision of water and the provision of sewerage services were offered as a joint package, therefore, both were entitled to tax exemption. 

The KRA insisted that according to the law, the provision of water and sewerage services were independent of each other, hence, provision of water could remain zero-rated while sewerage services could be VATable.

In an effort to break the stalemate, WASREB forwarded the matter to the Attorney General seeking his advice in January.

Professor Githu finally responded in favour of the KRA.

“It is our considered opinion that based on a strict and ordinary interpretation of tax law, it is only water supply that is zero-rated as part of water services and not sewerage,” the AG explained in a statement to WASREB.

The legal opinion has provided lee-way for water companies to now hike their current fees in order to keep up with the new tax requirements.

“Water companies are being asked to pay for costs that were not factored into the current water tariffs. If this matter is not resolved, you should expect to see these companies applying to Wasreb to increase their tariffs soon,” Robert Gakubia, the Wasreb chief executive, asserted in an interview with the Business Daily.