Kenya Revenue Authority (KRA) has appealed a court order that temporarily barred the collection of minimum tax from businesses.
Yesterday, Mr Paul Matuku, the Commissioner for Legal Services at KRA, said that the taxman has sought an early date for hearing of the case on May 19, before the second instalment of the minimum tax falls due.
In their arguments, KRA stated that businesses that had paid the minimum tax will retain the money in their iTax ledger pending the outcome of the petitions.
“KRA successfully sought for an early hearing date and the court has agreed to hear and determine the matter before the second instalment falls due. Additionally, KRA is putting in an appeal and an application for stay to the Court of Appeal” Mr Matuku said.
KRA started collecting the minimum tax at the rate of one per cent of the gross turnover in January following changes to the Income Tax Act (ITA).
But the High Court on Monday barred it from collecting the tax after three officials of the Kitengela Bar Owners Association challenged it arguing that enforcement of the tax is unconstitutional and would harm their businesses.
The appeal marks KRA’s bid to enforce collection of some Sh21 billion from businesses in the year ending June in an effort to plug its revenue shortfalls.
“KRA is putting in an appeal and an application for stay to the Court of Appeal,” the Business Daily quoted Paul Matuku.
High Court George Odunga in his ruling on Monday said the petition by the traders from Kajiado and Machakos counties raised weighty questions of law and that KRA can “hold its horses” for the time being, as the court listens to the arguments made by the parties.
Lobbies including Kenya Association of Manufacturers (KAM), the Retail Trade Association of Kenya (Retrak) and the Kenya Flower Council had also challenged the tax, arguing that most companies were reeling from effects of Covid-19 and that the introduction of the new tax might lead to the closure of more loss-making companies.
Parliament introduced the minimum tax at the rate of one percent of the gross turnover, from January 2021 through amendments to the Income Tax Act (ITA) last year.
The minimum tax is based on gross turnover and not gains or profits, and all persons, even those in a loss-making position are required to pay
