Gibbs Africa says it was owed Sh393m for work done by July last year

Justice John Mativo at the Milimani High Court

A consultancy firm has lost a legal bid to stop the taxman from collecting Sh283 million in unpaid tax.

Gibbs Africa Ltd, which provides consultancy in construction and designs, had sought court intervention after Kenya Revenue Authority (KRA) issued 13 notices to various Government agencies that had dealt with the firm, demanding the outstanding amount.

The cash, as explained in a ruling delivered earlier this month by High Court Judge John Mativo, was supposed to be remitted by Gibbs Africa to KRA as tax.

At the time, however, the firm was yet to be paid a total of Sh393 million by the Government and its agencies for work done as at July last year.

The debtors included Kenya National Highway Authority and the Machakos County government.

Gibbs Africa had told the court it was unable to pay the outstanding tax and effectively carry out its operations until it was paid.

The firm argued the issuance of notices was, therefore, “unreasonable and procedurally unfair”, adding that an earlier discounted payment of Sh208 million owed to them by the Government could have been used to clear the tax debt.

The Sh208 million discount was made known to the court in a letter dated November 18, 2016, where Gibbs said it had no objection if KRA went ahead to collect the outstanding invoices owed to them by the Government ministries and agencies.

Inability to pay

Justice Mativo in his ruling noted the case presented to the court was not essentially about issuance of the notices but that there was an agreement that was breached.

“It should be emphasised the respondent is statutorily mandated to collect taxes as provided under the law and provided its action fall within the law. This court will not intervene,” he said.

Justice Mativo, however, noted Gibbs was entitled to a waiver of penalties and interest on the principal taxes since its inability to pay the outstanding taxes within time was solely caused by non-settlement of invoices owed by the Government agencies.

The firm had told the court the Government owed them in excess of Sh444.4 million, out of which Sh235.9 million had been discounted, leaving a balance of Sh208.5 million.

KRA, through an affidavit by Nancy Jemutai from the enforcement department, argued that it had made several demands to Gibbs over taxes, the latest being December 1, 2016, demanding Sh283.7 million inclusive of interest and penalties which was not honoured.

The taxman said it was, therefore, forced to issue notices in accordance with tax procedures and also disputed the existence of an agreement discounting the payable tax.

Gibbs said the actual figure was Sh166.7 million, accounting for principal taxes payable after the Government paid them. “She (Nancy Jemutai) also averred that in the event the petitioner disputes the amounts demanded, then the right forum to adjudicate the dispute is the Tax Appeals Tribunal and not this court,” said Justice Mativo.