The Kenya Revenue Authority (KRA) has moved to challenge a ruling by High Court Judge Justice George Odunga that noted that the government’s plan to impose a minimum tax on businesses is illegal.
The taxman argues that Justice Odunga’s ruling leaves in a compromising situation as it will be forced to refund businesses millions of shillings it had already collected through minimum tax.
Then minimum tax is based on gross turnover and not gains or profits. This means that all businesses in the country including those that recorded losses will be required to pay the tax.
“That I am aware that as a precaution of the anticipated outcome of the judgment, 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 documents presented before the court.
“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 judgment will render the applicant’s appeal nugatory,” its added.
In his ruling, Justice Odunga noted that the government’s plan to impose tax in corporate sales, even on enterprises that register losses is illegal.
The appeal by KRA marks its bid to enforce the collection of about Sh21 billion from businesses in the current financial years to plug its revenue shortfalls.
According to KRA, unless the high court’s judgment is upheld, it will suffer a great loss in revenue collection that cannot be recovered.
KRA now wants the Court of Appeal to suspend Justice Odunga’s ruling to allow it to meet its target revenue collection.
KRA noted that its statutory mandate to collect taxes has been interfered with unless the judgment is varied or set aside.
