KRA hits snag in bid to collect Sh619m from Co-op Bank

The Kenya Revenue Authority (KRA) suffered a blow in its pursuit of Sh619.16 million in excise tax from Cooperative Bank of Kenya after a tribunal barred the taxman from collecting the money.

The Tax Appeals Tribunal (TAT) stopped the taxman from enforcing the order until Co-op Bank’s appeal against tax demands for the transactions made in 2013, 2014 and 2015 is heard and determined.

The tribunal dismissed KRA’s bid to quash Co-Op Bank’s appeal saying that the taxman relied on ambiguous clauses on definition of ‘interest, fees and commissions’ to demand the arrears.

KRA wanted the tribunal to reject Co-Op Bank’s appeal saying that the lender had failed to deduct excise duty for loan applications and moratoriums, commissions, fees and interest earned in the three years to 2015.

“The tribunal agrees with the appellant’s (Co-Op Bank) submission that the Finance Act 2012 was riddled with a lot of ambiguity,” the tribunal said its ruling.

“It is the tribunal’s considered opinion that it would be unjust to impose tax based on an ambiguity. Where a tax law is unclear, the law can only be interrupted in favor of the taxpayer.”

KRA is demanding the taxes on commissions paid to Co-op Bank for use of its Automated Teller Machines (ATMs) by other lenders, interest earned on loan moratoriums and salary advances and fees and commissions earned form other banking transactions.

The tribunal added that KRA’s decision to charge excise tax on commissions for use of Co-Op Bank’s ATMs amounts to double taxation because the withdrawal charges that are deducted at the withdrawal point are already subjected to excise duty.

KRA had in its push for the taxes told the tribunal that the lender failed to pay excise tax on commissions earned from other banks and fees charged on money transfers for the three years to 2015.