High Court declares Minimum Tax unconstitutional
National
By
Winfrey Owino
| Sep 20, 2021
The High Court in Machakos has declared a section of tax laws allowing the Kenya Revenue Authority (KRA) to demand minimum tax from companies as unconstitutional.
In a court session on Monday, September 20, Justice George Odunga ruled it is unfair to bundle loss-making companies into the same basket as those with a history of tax evasion.
“Minimum tax provisions are unconstitutional and the guidelines should be considered void. I, therefore, issue an order restraining KRA from implementing, further implementing or enforcing the provisions of Section 12D of the Income Tax Act,” Justice Odunga ruled.
In his ruling, Odunga explained that the minimum tax subjects businesses to double taxation and unfairly targets loss-making businesses to pay taxes from their capital.
READ MORE
CS kicks out Kuscco board after new audit reveals loss of billions
New payment platform takes on telcos, banks
Climate change could derail EAC economies, central bank bosses warn
Uji Power: The undying power of Kenyan frugal innovations
Kenya faulted for relying on 'poor country' exports
Treasury ramps up allocation to Hustler Fund as borrowers struggle to get loans
Parliament wants unoperational refineries company dissolved
Win for Mombasa as KPA starts to collect levies from ships, lories
Funds misuse, low skills hamper Nairobi's bid to tap green finance
“This punitive amendment can only be enjoyed by thriving business. The solution is not to cast the net wide to get culprits but to come up with a tailor-made solution aimed at catching the culprits only,” Odunga said.
The courts concluded that the minimum tax would lead to sacrificial victims since businesses loss-making businesses will be sacrificed.
Minimum tax was introduced under the Finance Act 2020 to be charged at the rate of one per cent of the gross turnover of a business starting January 1, 2021.
Business personalities who moved to court to challenge the Kenya Revenue Authority’s introduction of an additional tax said it was “unconstitutional, unlawful and devastating.”