An activist has moved to court to challenge a tax waiver passed to Commercial Bank of Africa when it merged with NIC Bank.
Activist Okiya Omtatah in his case filed before the High Court claimed that Kenyans will unlawfully lose Sh300 million in the process, which he claims was done secretly.
According to Okiya, Treasury Cabinet Secretary Ukur Yattani violated the law while allowing CBA, which is associated with the Kenyatta family, not to pay taxes from the buyout.
“The petitioner posits that the first respondent’s (Yattani) arbitrary decision to exempt the instruments executed in respect of the transactions relating to the merger of NIC and CBA from tax is invalid, null and void ab initio,” Omtatah argued.
In January, the two banks announced a planned merger in which current NIC Group shareholders would own 47 per cent of the merged entity and CBA shareholders 53 per cent.
“As a result of the share exchange transaction, it is proposed that NIC Group will acquire sole control of CBA and its subsidiaries,” CBA said in a statement published in Kenyan newspapers.
CBA is currently the seventh biggest bank in the country controlling a 6.05 per cent market share, according to the latest banking sector supervisory report.
NIC, on its part, controls 4.62 per cent. Combined, the two will have a market share of 10.67 per cent, which places the planned new entity above Cooperative Bank (9.93 per cent) and below KCB Bank (14.14 per cent)
“A combined entity would create a complementary base of over 38 million customers, a strong digital proposition and a robust corporate and asset finance offering,” the joint statement stated.
In court, Omtatah claims the tax waiver was never gazetted nor was the same disclosed to the public. He says the public would not benefit from the sale as the two lenders are private.
“There was no public interest to be served by exempting the merged NIC Group PLC and Commercial Bank of Africa, which are private profit-making entities, from paying the share transfer tax dues,” he argued.
Omtatah wants the court to quash the tax exemption notice, and compel the CS and the two lenders to pay the costs of the case.
“Your petitioner therefore humbly prays for a declaration that the decision to exempt the instruments executed in respect of the transactions relating to the merger of NIC Group PLC and Commercial Bank of Africa from tax is irregular, unlawful and unconstitutional and, therefore, invalid, null and void,” Omtatah prayed.
Do not miss out on the latest news. Join the Standard Digital Telegram channel HERE.