Editorials

Court decision on double taxation a win for business

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Summary

  • The question of taxation has remained contentious for years now ever since the country adopted the devolved system of governance.
  • At the centre of this debate is that businesses have been subjected to overlapping taxation structures by counties and the national government.
  • This problem has mainly affected businesses transiting goods and products across counties to the markets or ports of shipment abroad.

The question of taxation has remained contentious for years now ever since the country adopted the devolved system of governance.

At the centre of this debate is that businesses have been subjected to overlapping taxation structures by counties and the national government.

This problem has mainly affected businesses transiting goods and products across counties to the markets or ports of shipment abroad.

While there is a convergence that counties should raise revenue from economic activity within their respective territories, concerns have also been raised by business groups about instances where both the counties and the national government laid claim to revenue from sources such as transit and quality inspection fees.

This, according to the business groups, amounted to double taxation and is in breach of the Constitution and the Public Finance Management Act, 2012.

The Constitution allows the national government to impose an income tax, value-added tax, customs duty, and other duties on import and export goods. The national government is also allowed to levy excise tax, user fees for the services it provides, and any other taxes authorised by an Act of Parliament. The county governments are allowed to impose property rates, entertainment taxes, user fees, and charges for services they provide and any other tax authorised by an Act of Parliament.

There has, however, been a lack of balancing act to ensure that the taxation and other revenue-raising powers of counties are exercised in a way that they don’t compromise economic activities across county boundaries or the national mobility of goods, services, capital or labour.

This standoff has found its way to the courts and the Supreme Court has now validated the business community.

In a precedence-setting ruling, the Supreme Court has ruled that Mombasa County cannot charge Kwale titanium miner, Base Resources a Sh3,000 levy on its vehicles to access the country’s main port through a road constructed and managed by the national government and ordered the county refund some Sh1.5 million already collected from the firm.

This is a big win for businesses and counties must find other creative ways of boosting their homegrown revenue collection.