Treasury, KRA fight off pressure to cut taxes


Treasury, KRA fight off pressure to cut taxes

In Summary

  • For KRA, an appeal has been filed challenging the suspension of the minimum tax which was deemed as unconstitutional while the tax man is further prepared to fight it out to implement inflationary adjustments on excise duty.
  • On its part, the National Treasury is opposed to the withdrawal of any taxes of levies on petroleum products even as the debate on petrol taxes and the accompanying high cost of living reaches fever pitch.
  • KRA estimates a loss of Ksh.3.7 billion from a bump in the implementation of inflation adjustments to excise duty and a loss of more than Ksh.20 billion from a pause in minimum tax

The National Treasury and the Kenya Revenue Authority (KRA) are in a spirited battle to quell a push for tax cuts.

For the latter, an appeal has been filed challenging the suspension of the minimum tax which was deemed as unconstitutional while the tax man is further prepared to fight it out to implement inflationary adjustments on excise duty.

Last Monday, the High Court issued a temporary injunction blocking the expected inflationary adjustment to the rate of excise duty by 4.97 pending the determination of a petition which challenged the move had not been subjected to adequate public participation.

Meanwhile, KRA says it is opposed to freeze on minimum tax despite being an implementer of the tax provision.

“We believe the minimum tax is a sound policy measure. A business cannot continue posting losses but never closing yet it does not pay a penny in taxes,” KRA Commissioner Githii Mburu said on Monday.

On its part, the National Treasury is opposed to the withdrawal of any taxes of levies on petroleum products even as the debate on petrol taxes and the accompanying high cost of living reaches fever pitch.

Several political leaders including former Prime Minister Raila Odinga and Interior Cabinet Secretary Fred Matiangi have been the latest to drop hints on lower fuel costs this week even as the country awaits a report by the Finance and National Planning Committee on its assessment of a push to vacate VAT on fuel.

“Before we yield to pressure, we have to look at the revenue base and why we put such taxes. For instance, when it comes to fuel, we have a road maintenance fuel levy fee. If we do away with that, then expect Kenyans to ride on pot-holes,” said Treasury Chief Administrative Secretary Nelson Gaichuhie.

“All taxes imposed to Kenyans are well researched and one cannot say that they are out of imagination. Any tax waiver of repeal has a consequence.

For KRA, the consequence is a dent on fiscal space. The tax man for instance estimates a loss of Ksh.3.7 billion from a bump in the implementation of inflation adjustments to excise duty and a loss of more than Ksh.20 billion from a pause in minimum tax.

According to Treasury, the pair could be forced to widen its tax net as a contingency measure should the specific tax cuts take effect.

“We are not expecting that to happen but if it does, we will work with KRA to net more tax payers and hit our targets,” added Mr Gaichuhie.

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