“I find that this is an appropriate case for the KRA to “hold its horse” for me time being as this court navigates through the labyrinth of the respective contentions made by the parties herein”, Judge Odunga to KRA.
BY SAM ALFAN.
The High Court has temporarily stopped Kenya Revenue Authority (KRA) from collecting the Minimum Tax, dealing a blow to the taxman which is struggling to meet revenue targets.
Justice George Odunga issued the orders saying the petition by traders from Kajiado and Machakos counties raises weighty questions of law and KRA can “hold its horses” for the time being, as the court navigates the arguments made by parties involved in the case.
“In the results I grant conservatory orders restraining Kenya Revenue Authority whether acting jointly or severally by itself, it’s servants, agents, representatives or otherwise from the implementation, further implementation, administration, application or enforcement of section 12D of the Income Tax Act, chapter 470 of the laws of Kenya as amended by the Tax Laws (Amendment) (No. 2) Act, 2020 by collecting or demanding payment of the minimum Tax pending hearing and determination of this petition”, ruled Odunga.
The judge noted that the Impugned Amendment introduces Minimum Tax in Kenya for the first time, hence the Respondents (KRA) can hold off on its implementation for the limited period of determination of the petition.
He said the suspension of the law will not occasion a lacuna in the operations or governance structure which, if left unfilled, even for a short while is likely to cause very grave consequences to the general populace.
“In this petitions, I am satisfied that the issues raised herein disclose substantial questions of constitutional law as what is at stake is the balancing of the need to secure the government’s revenue sources on one hand and the protection of the Bill of Rights on the other both of which the State is enjoined to attain,” said Odunga.
Stanley Waweru, Samwel Gitonga and Bernard Oranga, who are officials of Kitengela Bar Owners Association sued KRA, National Assembly and the Attorney General challenging the introduction of Minimum Tax at the rate of 1% of the gross turnover effective January 1,2021.
They are bar owners are based in Kitengela, Isinya, Athi River and Mavoko in Kajiado and Machakos counties.
Minimum Tax was assented by President Kenyatta last June after Parliament amended the Finance Act, 2020 by amending Income Tax Act (ITA) and introduced a new Section 12D which provided the Minimum Tax at the rate of 1 per cent of the gross turnover, from January 2021.
KRA later published “Guidelines on Minimum Tax”, which defines Gross Turnover. Minimum Tax is based on gross turnover and not gains or profits, and all persons, even those in a loss-making position will be required to pay the tax.
The bar owners argued that the imminent enforcement of what they term as an unconstitutional, unlawful and devastating tax is a threat to their businesses.
They further argued that by its very definition, Minimum tax does not amount to value-added tax, custom duties nor excise tax, yet KRA wanted to include it in the category of income tax.