BY SAM ALFAN.
Kenya Revenue Authority has moved to court seeking to overturn decision restraining it from imposing tax on Motor Vehicle Reimbursement to Members of County Assemblies.
The taxman said in the application that the County Assembly Forum failed to disclose to the Court that the Motor Vehicle Reimbursement benefit is actually the benefit received in the course of employment and properly captured as a benefit in the gazette Notice issued by Salaries Remuneration Commission.
“It is of utmost urgency that the matter be placed before this Honorable Court for consideration of the orders sought herein to arrest a situation where the funds and disbursed gross of tax and hence render the recovery difficult,” says the taxman in the application.
The KRA further argues that the County Assembly Forum mislead the court that the section 5 (2) (a) (iii) does not provide for the taxation of the benefit while the same covers all the benefits gained in the course of employment or services rendered and the Motor Vehicle Reimbursement benefit is covered.
The taxman also said the Forum failed to disclose to court that they had been engaged in the process leading to the demand of the taxes and had been informed by the KRA on several occasions on the correct tax treatment.
“The court having failed to be fully disclosed to the true character of the Motor Vehicle Reimbursement proceeded to issue the conservatory orders and with the Conservatory orders currently in place the County Assemblies will proceed and disburse the amounts gross of taxes and this being an individual tax on the employees, will have no way of recovering the same,” says taxman.
According to KRA, under section 5 (2) (a) (ii) both cash and none cash benefit received in the course of employment, is subject to tax together with the other emoluments under the PAYE regime.
The taxman said it is disbursed to the beneficiaries and as such the court should ensure that the same is not disbursed without deducting the taxes.
“It is of utmost urgency that the matter be placed before this Honorable Court for consideration of the orders sought to ensure that the County Assemblies deduct the taxes in respect to the allowance before disbursing it in the current end month -30 May, 2023 or any subsequent month,” pleads the taxman.
KRA adds that if the amounts are disbursed gross of tax it will be difficult to recover and the County Assemblies will also face difficulty to account for the same which will be a violation of section 37 of the Income Tax Act and Article 201 and 210 of the Constitution.
It adds that the county assemblies that were complying with the provision and had payments plans have since issued letters suspending any further payment awaiting the outcome of the court proceedings.
KRA says it further in the interest of both the 1 Respondent and County Assemblies that the matter be determined promptly as the same will continue to accrue interest and penalties if not remitted at point of disbursement hence not in the public interest.
