Listen to This Article Enhance your reading experience by listening to this article.

DISPUTE: Kenya Revenue Authority (KRA) will hold the money so far paid as minimum tax pending the hearing and determination of a court case challenging the implementation of the new levy.

Responding to temporary orders issued by a Machakos High Court on Monday halting the implementation of the minimum tax, the taxman said it would abide by the ruling issued and await the outcome of the petition whose hearing is slated for May 19.

“Those who have already paid the tax will retain it as a credit in their iTax ledger pending the outcome of the petitions,” KRA said in a statement.

It expressed hope the matter could be heard and determined before the second installment becomes due. 

Tax payments

Companies are required to submit minimum tax payments on the 20th day of March, June, September and December.

National Taxpayers Association National Coordinator, Irene Otieno, however, faulted the move by the taxman to hold onto the monies paid, saying it might be a tall order for taxpayers to get back their money should the courts find the new tax unlawful.

“The government would say it’s easy for them to return back the taxes paid to the businesses if the suit goes the way of the petitioner.

But that thinking of the government is normally wrong because you find that even the VAT refunds, the government takes so long to pay. Same case to pending with bills,” Otieno said.

She noted that while the government was right in seeking to raise more revenue, there was need for more discussions on how to achieve this without necessarily imposing tax on gross income.

Implementation of the tax was to begin yesterday but was halted after Isinya Bar Owners Association moved to the high court, saying the new tax contravenes the Constitution.

In their petition, the bar owners argue that the new tax will hurt their businesses as well as many other small and medium enterprises (SMEs) who are already hurting from the effect of Covid-19 pandemic on the economy.

In his ruling, Justice George Odunga granted conservatory orders, saying continued implementation of the legislation could kill businesses and result in loss of livelihoods for millions of Kenyans in the SME sector.

“The death of a business is certainly not a damage that can be remedied by way of damages.

This is why it is in the interest of justice that this court intervenes to preserve the business and the livelihoods of the petitioners,” Odunga said.

Minimum tax was introduced last year via Finance Bill, 2020, in a bid to widen the tax bracket and raise more revenues amid frequent revenue shortfalls.

In June last year, Treasury said it hoped to raise Sh21 billion from the implementation of the minimum tax.