Economy

Court nullifies taxes collected ahead of passing Finance Bill

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John Njiraini, KRA commissioner-general. FILE PHOTO | NMG

Summary

  • Justice Wilfrida Okwany said that Provisional Collection of Taxes and Duties Act (PCTDA) is inconsistent with the Constitution since it allows imposition of the tax even before Parliament passes the Finance Bill. The judge noted that only Parliament has constitutional power to impose tax.
  • The Treasury used an alternative law to bring into effect the tax contained in the Finance Bill on July 1, prompting activist Okiya Omtatah to contest the higher levies in court.

Collections of higher taxes imposed on mobile money transfers, kerosene, bottled water and cars before parliamentary approval of the Finance Bill have been declared unconstitutional.

The Treasury used an alternative law to bring into effect the tax contained in the Finance Bill on July 1, prompting activist Okiya Omtatah to contest the higher levies in court.

The Provisional Collection of Taxes and Duties Act allows the Treasury to collect the tax billions it would have missed out on as it awaits parliamentary approval of the tax measures, given that taxes cannot be charged retrospectively in the event that the Finance Bill is passed after the effective date of a particular levy.

Justice Wilfrida Okwany said that Provisional Collection of Taxes and Duties Act (PCTDA) is inconsistent with the Constitution since it allows imposition of the tax even before Parliament passes the Finance Bill. The judge noted that only Parliament has constitutional power to impose tax.

“I wish to reiterate that the issue for determination before this court is not the constitutionality of the Finance Bill per se but its implementation, on a provisional basis, before the Bill is passed into law,” said Justice Okwany. The judge declared that PCTDA “unconstitutional and therefore invalid, null and void”. The Treasury is allowed to collect the taxes under the PCTDA for up to six months — until January 15, 2019 — although the law allows extension of the period with Parliament’s approval.

Once the Finance Bill is passed and signed into law, the legal notice on tax collection guided by the PCTDA ceases to have effect, and any changes applicable from the newly enacted law apply.

The notice also becomes voided when the National Assembly rejects any sections of the Finance Bill.

Tax experts said the Treasury’s publication of the notice was meant to cover the taxman against possible delay in passing the Finance Bill.

Mr Omtatah yesterday told the Business Daily that any firm or individual who was charged the said tax during the period can ask for a refund, signalling that the battle with the Treasury over early duty collection is not over.