KRA to appeal minimum tax ban order

The Kenya Revenue Authority (KRA) will appeal a court ruling that has barred it from collecting minimum tax from businesses.

Mr Paul Matuku, the Commissioner for Legal Services at KRA said Monday that the taxman disagrees with the findings of the High Court and will prefer an appeal.

The taxman started collecting the minimum tax at the rate of one percent of the gross turnover in January following changes to the Income Tax Act last year.

But High Court judge George Odunga, sitting in Machakos, on Monday barred it from collecting the tax after he ruled the law change unconstitutional.

“The Kenya Revenue Authority respectfully disagrees with the findings of the Court and will prefer an appeal to the Court of Appeal to challenge this finding. This is to ensure that KRA continues to review and improve on tax policies in order to reduce the tax burden while ensuring that every citizen contributes their fair share of tax,” said Mr Matuku in a statement.

The appeal marks KRA’s bid to enforce the collection of some Sh21 billion from businesses in the year ending June in an effort to plug its revenue shortfalls.

In his judgment, Justice Odunga declared section 12D of the Income Tax Act, which introduced the minimum tax, illegal.

The minimum tax was applicable to businesses regardless of whether they make a profit or not.

Kitengela Bar Owners Association challenged it in a petition arguing that enforcement of the tax was unconstitutional and would harm their businesses.

The petition was filed against the National Assembly, KRA and Attorney-General Paul Kihara Kariuki.