KRA to appeal order suspending implementation of minimum tax


KRA to appeal order suspending implementation of minimum tax

In Summary

  • The Isinya Bar Owners Association and Kenya Association of Manufacturers had filed a petition at the High Court in Machakos.
  • The association's officials sued the National Assembly alongside KRA’s Commissioner General and the Attorney General arguing that the minimum tax contravenes the constitution.
  • In their argument, the petitioners stated the implementation of the tax would result in the annihilation of their business alongside the majority of SMEs which are already struggling to generate any income under adverse economic conditions.

The Kenya Revenue Authority is putting in an appeal and an application for stay at the Court of Appeal following conservatory orders to temporarily suspend implementation of minimum tax.

In a statement on Tuesday, KRA said it sought an early hearing date and the court has agreed to hear and determine the matter before the second installment falls due.

“KRA shall abide by the ruling issued by the Court and await the outcome of the main petition slated for hearing on May 19, 2021. Those who have already paid the tax will retain it as a credit in their iTax ledger pending the outcome of the petitions,” the statement reads.

The taxman said since the matter is still pending in court, it will not discuss the merits of the petitions as this would be akin to litigating outside the court.

The Isinya Bar Owners Association and Kenya Association of Manufacturers had filed a petition at the High Court in Machakos.

The association’s officials sued the National Assembly alongside KRA’s Commissioner General and the Attorney General arguing that the minimum tax contravenes the constitution.

In their argument, the petitioners stated the implementation of the tax would result in the annihilation of their business alongside the majority of small and medium enterprises (SMEs) which are already struggling to generate any income under adverse economic conditions.

Moreover, the petitioners state the minimum tax is a contravention of Section 15 (1) of the Income Tax Act (ITA) which argues taxes should only be subjected to gains/profit and not turnover as visioned by the minimum tax.

Further, the aggrieved party states the minimum tax does not allow for the deduction of expenses and cost before the deduction of due tax arrears.

At the same time, the petitioners have warned tax obligations under the minimum tax could rise beyond the statutory 30 per cent corporate tax leaving a heavier taxation burden.

In addition, the petition argues the minimum tax cares less about the ability of taxpayers to pay up while the majority of SMEs lie in loss making territory in their early years.

Charged at the rate of one per cent of gross turnover, the minimum tax came into being through the 2020 Finance Act and was promoted by National Treasury Cabinet Secretary Ukur Yatani as a cure for tax evasion perpetrated through the declaration of ‘artificial losses’.

The tax was to be paid in four installments and on the 20th day of each period ending on the fourth, sixth, ninth and twelfth month of the year of income.

Technically, this means business would account for the tax on April 20, July 20, October 20 and January 20.

For Citizen TV updates
Join @citizentvke Telegram channel



Video Of The Day: Guns galore

Citizen Reporter
Story By Citizen Reporter
More by this author