The Kenya Revenue Authority (KRA) will be forced to refund businesses millions of shillings that it has collected through the minimum tax.
The taxman says the High Court judgement declaring section 12D of the Income Tax Act unconstitutional means that the KRA must embark on refunding the already collected revenues.
The taxman has moved to the Court of Appeal seeking suspension of the September 20, 2021 judgment that stopped it from collecting the minimum tax at the rate of one percent of the gross turnover.
The minimum tax is based on gross turnover and not gains or profits, and all businesses, even those in a loss-making position, are required to pay.
“That I am aware that as a precaution of the anticipated outcome of the judgement, some taxpayers despite the institution of the petition subject to this application had been paying taxes in compliance of section 12D of the Income Tax Act,” KRA said in court papers.
Justice George Odunga ruled that the government’s plan to impose a minimum tax on corporate sales, even when a company reports losses, is illegal.
“This leaves the applicant in a precarious and chaotic position because on one hand [sic], the applicant intends to appeal the High Court’s decision… while on the other hand, refunds of the already paid taxes based on the High Court judgement will render the applicant’s appeal nugatory,” KRA said.
The minimum tax took effect in January following changes to the Income Tax Act last year.
The appeal marks KRA’s bid to enforce the collection of some Sh21 billion from businesses in the year to June, 2022 in an effort to plug its revenue shortfalls.
The Treasury Secretary Ukur Yatani told Parliament that the judgement against KRA’s collection of minimum tax has left it with a Sh22 billion budget deficit.
“The decision by the court stopping charging of minimum tax has already caused a Sh22 billion deficit in our budget and in fact we will have to revise most of our budgets,” Mr Yatani said.
The taxman reckon that unless the judgement is stayed, it will suffer since it will have lost in collection of revenue which cannot be thereafter recovered.
KRA wants the Court of Appeal to suspend the judgement to enable it meet its targets of projected revenue collections from the implementation of section 12D of the Income Tax Act as part of its national revenue targets.
In court papers filed on September 28, the KRA said its statutory mandate to collect taxes has been interfered with unless the judgement is varied or set aside.
The government hoped to use the minimum tax strategy to ensure companies that had over the years reported losses as a tax-avoidance ploy to also contribute to the exchequer.
Kitengela Bar Owners Association challenged it in a petition arguing that enforcement of the tax was unconstitutional and would harm their businesses.
Source link : https://allafrica.com/stories/202110050140.html
Author : Nation
Publish date : 2021-10-05 07:05:59