Uhuru-linked bank: We will obey court ruling on Sh350m tax waiver

CBA and NIC Group merger created one of the largest financial services groups in the region. [File, Standard] Kenya's third largest bank NCBA Group now says it is ready to pay the taxman the Sh350 million tax waiver it benefited from during the merger of NIC and CBA banks in 2019; if court determines that it was not entitled to that waiver. The National Treasury exempted them from paying share transfer tax amount to Sh350 million during former President Uhuru Kenyatta's regime. The Kenyatta family had a significant stake in CBA, while the Nairobi Securities Exchange-listed NIC Group was controlled by the wealthy Philip Ndegwa family. The merger created one of the largest financial services groups in the region. Court case The waiver is the subject of a court case, with activist Okiya Omtatah arguing that the National Treasury effected "a secretive and opaque decision" to exempt the merger of the two lenders from tax. Omtatah says former Treasury Cabinet Secretary Henry Rotich did not have the power to arbitrarily grant the tax waiver. "The taxpayer will suffer great loss estimated at Sh350 million in lost tax revenues that would otherwise accrue to public coffers," he says in his application. He has sued the Treasury CS and the Attorney-General, while NIC and CBA were listed as interested parties. Law allows tax waivers But NCBA Group Managing Director John Gachora on Thursday defended the tax waiver, saying it was above board as the law allows for such. "Transactions of this type are guaranteed in law," Mr Gachora said during an interview on KTN New's Business Today show on Thursday February 2. "People need to understand that the waiver was given to NCBA or the merging parties with 26,000 shareholders behind the banks that were merging." Gachora said NCBA, in which former President Kenyatta's family retains a significant stake, has been tax compliant, dismissing claims of preferential treatment by the former regime. "In the same year that we got the waiver for Sh350 million, we paid total taxes of Sh4.4 billion, more than 10 times that people were talking about," he said, adding that NCBA is one of the biggest taxpayers in the country, having paid taxes amounting to Sh6.7 billion in 2021 and will fork out Sh14.3 billion in taxes for last year. "Sh350 million in the context of what we pay is nothing," said Gachora. "What I assure every Kenyan is that should the court find that NCBA was not entitled to that waiver... the day the court makes that determination, the following day we will send a cheque of Sh350 million. That I can assure you," said Gachora. Politics Before the merger, NIC and CBA operated independent banking, stock brokerage and other businesses in Kenya and other countries, including Tanzania. The tax waiver was the subject of the 2022 political campaigns, with President William Ruto and his Deputy Rigathi Gachagua, accusing former President Kenyatta, who was rooting for Azimio leader Raila Odinga, of using his position to influence the deal. They cited the deal as part of systematic "State capture" by the former regime, allegations Ruto's predecessor denied. "Through a gazette notice and by a single signature, two companies owned by the First Family were exempted from paying Sh350 million, money that can put up 35 Level 3 hospitals in Kenya," Gachagua alleged in the run-up to the 2022 General Election. The new administration has vowed to enforce new tax reforms and a clamp down on tax evasion. "We cannot continue to operate in a space where those in power exempt themselves from paying taxes. Their time is up. Every citizen must pay taxes," he said recently in Mombasa. Former Treasury Secretary Henry Rotich exempted the transfer of CBA shares into NIC Bank from paying stamp duty of one per cent of the worth of the unquoted stocks being transferred. The transaction took place through a share swap between the two banks. The merger deal would see NCBA boost its profitability by cutting costs across its regional operations.

Uhuru-linked bank: We will obey court ruling on Sh350m tax waiver

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Uhuru-linked bank: We will obey court ruling on Sh350m tax waiver

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