The Kenya Revenue Authority (KRA) is mulling moving to the Court of Appeal over the 1% minimum tax ruling.
This is after the High Court judge George Odunga on Monday declared the tax provisions unconstitutional and the minimum tax guidelines void.
According to KRA, the High Court decision does not give it provisions to improve on tax policies in the country where every Kenyan citizen is required to contribute their faire share of tax.
“The Kenya Revenue Authority respectifully disagrees with the finding of the court and will prefer an appeal to the Court of Appeal,” said KRA in a statement.
In a ruling in Machakos, Odunga issued an order barring KRA from enforcing the minimum tax provisions.
“The minimum tax has the potential of not only subjecting the people to double taxation but also unfairly targeting people whose businesses for whatever reason are in loss making positions to pay taxes from their capital rather than profits,” said Odunga.
The judge also said that “those who are able to pay taxes from their profits will not have their capital affected while those generally in loss making position will be sacrificed at the altar.”
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It is a blow to the taxman who has been keen in the recent past trying to widen tax bracket to achieve revenue targets.
Minimum Tax Declaration
Treasury Cabinet Secretary Ukur Yatani proposed the minimum tax in 2020, charged at the rate of one percent of total annual sales, to be paid by businesses whose tax obligation is below one per cent of their gross sales.
According to Yatani, the move is meant to net entities persistently declaring losses deceitfully to avoid taxation by government.
President Uhuru Kenyatta went ahead and assented to the Finance Act, 2020 which amended the income tax act in June 2020 by introducing a new section 12D providing for the introduction of minimum tax at the rate of 1 percent of the gross turnover effective January 1, 2021.
Four months later, the High Court stopped the implementation of a 1 percent minimum tax which was to fall due on April 20, 2021.
The order followed a petition challenging the implementation of the new tax by the Kitengela Bar Owners Association.
The officials of the association sued the National Assembly alongside KRA’s Commissioner General and the Attorney General arguing the minimum tax contravenes the constitution.
