Give Caesar what is to Caesar's, KRA tells judge in tax dispute
By Paul Ogemba | November 5th 2021
The Kenya Revenue Authority (KRA) has accused a judge of denying it an opportunity to collect taxes by ordering the agency to reopen a local brewery it had closed in a Sh2.7 million dispute.
KRA claims the order by Justice Weldon Korir that it reopens Mount Kenya Breweries Limited would deny it the money the company tried to evade paying when it was found with 15,000 counterfeit excise duty stamps.
The taxman has filed an appeal through lawyer Leparan Lemiso seeking to have the High Court order suspended and that they be allowed to continue locking up the brewery until the tax dispute is determined.
“The judge failed to appreciate the amount of revenue we are at risk of losing if the company is allowed to continue production without proper safeguards being put in place. By extension, it is the government that is going to lose taxes that it requires to operate,” said Lemiso.
KRA said the judge’s decision, if allowed to stand, will be seen as discrimination against other companies who had faced a similar fate when they were closed down for evading tax. The taxman wants the Appellate Court to overturn Justice Korir's order.
The judge, on Monday, ordered KRA to immediately reopen Mount Kenya Breweries Limited which it had closed over allegations that it had 16,600 bottles of beer with fake excise duty stamps, and told the taxman to stop killing local companies in the guise of collecting taxes.
The judge stated that KRA had become a monster by killing local businesses over alleged failure to pay taxes which in turn affect thousands of families whose breadwinners are rendered jobless once the companies are shut down.
He ruled that when KRA proceeds to kill businesses in the guise of collecting taxes, it becomes an undertaker and will itself eventually die since its survival depends on the existence of income-generating businesses from which it can collect taxes.
Mt Kenya Breweries filed a suit accusing KRA of raiding its Nanyuki-based factory on April 9 and where it confiscated the finished products, locked the company premises, and stopped their operations.
Justice Korir ruled that although KRA is justified to collect taxes and that the companies have an obligation to declare and remit their taxes, closing their premises and stopping production is not the right way to deal with tax evasion.
KRA, in its appeal, argued that the judge failed to consider the consequences of allowing the company to operate when they had admitted to having the counterfeit excise duty stamps.
Lemiso submitted that the judge erred by issuing orders that contradict provisions of the Excise Duty Act and for failing to appreciate that the taxman was acting in public interest to ensure that the company pays the due tax.
He argued that despite admission by the company that it was involved in tax evasion and that it was found in possession of 15,000 counterfeit excise duty stamps with revenue implication of Sh2,754,730, the judge still ordered KRA to reinstate their license and reopen the factory.
“He failed to appreciate that the use of counterfeit stamps amounts to tax evasion which does not only deny the government revenue but is also cancer that needs to be stamped out at the earliest opportunity,” said Lemiso.
He added that KRA was justified in closing the factory since the tax laws allow it to suspend the licence of any person found in possession of counterfeit excise duty stamps and seize goods bearing fake stamps.
Lemiso claimed the order will create unfair competition in the manufacturing where other companies will also take advantage to evade taxes and challenge any decision to close them down
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