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Minimum Tax Declared Illegal – How Kitengela Bar Owners Saved Kenyans

In their petition, the bar owners' officials took on the National Assembly, the KRA Commissioner General and the Attorney General.

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4 Officials of the Kitengela Bar Owners Association – Stanley Waweru (Chairman), Samwel Gitonga (Vice-Chairman), Bernard Oranga (Organizing Secretary) and Paul Mukono Kuria (Patron) – are the heroes for businesses across Kenya after their petition against the minimum tax ultimately proved successful.

Justice George Odunga on Monday, September 20 issued a ruling barring the Kenya Revenue Authority (KRA) from collecting minimum tax from businesses, further declaring section 12D of the Income Tax Act unconstitutional.

The minimum tax was applicable to businesses regardless of whether they make a profit or not.

Despite heavy opposition from businesses feeling the pinch from the pandemic, the Finance Act, 2020 was assented to by President Uhuru Kenyatta on June 30 last year after the National Assembly amended the Income Tax Act by introducing a new Section 12D providing for introduction of Minimum Tax at the rate of 1% of the gross turnover effective 1 January 2021.

In their petition, the bar owners’ officials took on the National Assembly, the KRA Commissioner General and the Attorney General.

In court documents, they stated that the minimum tax “if allowed to be imposed will without an iota of doubt lead to the absolute annihilation of the Petitioners business along with a majority of Small and medium enterprises struggling to earn an income in the already abysmal economy.”

READ>>>>>KRA Barred from Collecting Minimum Tax as Businesses Protest

Odunga agreed with the petitioners that the minimum tax provisions were unconstitutional, further declaring the ‘Guidelines on minimum tax’ null and void.

He highlighted the potential damaging effects that enforcement of the tax would have on businesses, particularly those in loss-making positions.

“The minimum tax has not only the potential to subject the people to double taxation but also unfairly targeting people whose businesses, for whatever reason, are in loss making position…

“”Those who are able to pay taxes from their profits will not have their capital affected while those genuinely in losses will be sacrificed at the altar of those concealing their profits. That is not how to enact a fiscal legislation,” he asserted.

Justice Odunga had in April 2021 temporarily suspended implementation of the minimum tax provisions pending determination on the petition.

The latest ruling was widely welcomed by the business communities and lobby groups, who argued that focus needed to be on economic recovery and strengthening businesses in the wake of the pandemic.

“This historic decision by the courts today (Monday) provides much needed relief to businesses that continue to strain under the weight of over-taxation and unpredictability in the country today. It not only ensures that many businesses remain open and productive but provides space for businesses to bounce back and generate the much-needed revenue to support our country,” the lobbies including Kenya Association of Manufacturers (KAM), the Retail Trade Association of Kenya (Retrak) and the Kenya Flower Council noted in a statement following the ruling.

Exempted from the minimum tax were individuals and companies paying employment tax and PAYE, rental income tax, turnover tax for small-sized firms, capital gains and proceeds from mining or oil exploration taxes.

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MARTIN SIELEhttps://loud.co.ke/
Martin K.N Siele is the Content Lead at Business Today. He is also a Quartz contributor and a 2021 Baraza Media Lab-Fringe Graph Data Storytelling Fellow. Passionate about digital media, sports and entertainment, Siele also founded Loud.co.ke
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