New Tax Rule Would Cost Keroche Ksh11 Billion

A State-backed proposal to amend provisions of the Tax Procedures Act is rubbing a section of Kenyans, particularly those in business, the wrong way.

In his budget address before Parliament on Thursday, April 8, National Treasury Cabinet Secretary Ukur Yattani anounced that in disputes before the tax appeals tribunal, they wanted 50% of the disputed amount to be deposited in a Central Bank of Kenya (CBK) account.

He explained that it was meant to boost revenue collection by the Kenya Revenue Authority (KRA), which is notably set to be renamed the Kenya Revenue Service (KRS). KRA has many long-running disputes with several companies from whom it is demanding taxes running into billions of shillings.

In the Ksh22.9 billion tax dispute between Keroche Breweries and KRA, for instance, Keroche would be required to deposit Ksh11.45 billion in a CBK account.

The move potentially deplete many firms’ cash reserves. In the case of Keroche, the firm was staring at closure and job losses after KRA shut it down for non-payment of taxes.

A payment plan negotiated over a week allowed the firm to resume operations. Keroche founder Tabitha Karanja noted that disruptions by KRA had made it difficult to honor their tax obligations.

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In the case of Nairobi-based SUV manufacturer, Mobius Motors, KRA was seeking Ksh73 million im taxes in 2021. Mobius moved to the tribunal and offered the court a look at its books to prove that it was in no position to fork out the amount and that paying it would leave it facing collapse.

Under the proposed changes, Mobius would be required to deposit Ksh36.5 million in a CBK account.

Currently, courts decide whether KRA’s security demands are reasonable and set the amount to be given as a deposit or bank guarantee.

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