KRA To Appeal High Court Judgement That Declared Minimum Tax Unconstitutional

MACHAKOS, Kenya, Sept 20 – Plans by the government to impose a minimum tax on corporate sales, even when a company reports losses has been declared unconstitutional by high court judge George Odunga.

Compounded by challenges brought about by the COVID-19 global pandemic,  companies ca n now breathe a sigh of relief after expressing concerns over paying the 1% levy on total sales from the beginning of 2021.

Odunga ruled that it was unfair for the government to place companies that have incurred losses in the same bracket as those with a history of tax evasion. He further said the minimum tax subjects businesses to double taxation.

“Minimum tax provisions are unconstitutional and the guidelines should be considered void. I therefore, issue an order restraining KRA from implementing, further implementing or enforcing the provisions of Section 12D of the Income Tax Act,” ruled Justice Odunga.

Minimum tax was introduced under the Finance Act 2020 to be charged at the rate of 1 per cent of the gross turnover of a business starting January 1, 2021. 

“This punitive amendment can only be enjoyed by thriving business. The solution is not to cast the net wide to get culprits but to come up with a tailor-made solution aimed at catching the culprits only,” he said.

The Kenya Revenue Authority (KRA) has has now vowed to challenged the judgement by the High Court.

“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 KRA in a statement.

The judgment now halts the governments plans to collect at least Sh21 billion annually which was geared towards reducing the country’s fiscal deficit to 7.5% of gross domestic product in the year through June.