KRA wants insurance brokers’ tax case thrown out

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KRA says the suit by brokers over the 10 per cent tax on commissions is baseless since Justice Isaac Lenaola had earlier ruled against them.

The Kenya Revenue Authority (KRA) wants the High Court to throw out a case filed by insurance brokers challenging a 10 per cent tax introduced in 2013, arguing that their concerns were dismissed in an earlier suit.

The KRA holds that the court last year ruled that the new levy on the brokers’ earnings is constitutional, and that the concerns raised in the current suit were declared baseless by Justice Isaac Lenaola.

The new levy is to be charged on commission brokers charge to insured parties. But the 18 brokerage firms in the suit hold that they do not charge any commission on insured parties, hence docking a further 10 per cent on their earnings is unconstitutional.

“The petitioners were through the Association of Kenya Insurers (AKI) parties to the said suit. The issues raised in this petition were heard and determined in the case filed by the AKI against the commissioner of domestic taxes,” says KRA’s lawyer Sheila Sanga in court documents.

The insurance brokers have asked the court to quash the law, as it will violate their rights, and those of consumers. They hold that commission is charged on premiums which are paid by insurance companies, not consumers.

Brokers say the costs they face from the tax will be passed on to insurance consumers, which will make insurance services more expensive without an increase in the quality of delivery. This, the brokers add, will be a violation of consumer rights.

But the KRA has challenged the brokers’ argument, as it says they did not appeal the court’s decision last year, hence gave the taxman leeway to collect the tax. The KRA also insists that the court has no jurisdiction to hear the case.

“As a result of the said judgment, the KRA was at liberty to collect excise duty. The brokers did not proffer the appeal against the decision of the court. This court has no jurisdiction to hear, determine or otherwise deal with this petition,” Ms Sanga added.

The tax will be charged on other players in the industry, including insurance companies, agents, loss adjustors, loss assessors and other intermediaries. This, the firms say, will drive up the cost of insurance.

“Each of the industry players is required to pass on the tax to the ultimate consumer which unfortunately is the same person; the insured. The culminative effect of this is that the cost of insurance will go up,” the brokers say.