Is the end of debit cards nearing in Kenya? Will Kenya Revenue Authority (KRA) score in its venture to start taxing payments made via debit cards? How will this affect the uptake of the services from the banks?
KRA has been given a go-ahead to add a service tax on purchases made by debit cards in Kenya as the taximan looks to hit the revenue collection target, one that has often been missed.
The Court of Appeal on Monday gave KRA the right to tax charges made by banks to card companies. KRA had moved to court to appeal against a ruling made earlier in favor of a local bank that had been protected from remitting royalties summed from interchange fees.
“We are persuaded that the evidence on record properly established that payments made to card companies were royalty and further interchange fees were for management services. Therefore both payments were subject to withholding tax,” appellate judges ruled.
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According to three judges of the Court of Appeal, the tax should be executed owing to the fact a transaction between the banks is a professional service. The ruling is now set to impact customers who purchase commodities through the cards.
The ruling also means that the Kenya Revenue Authority (KRA) has a free hand to compel taxpayers to provide details of wealth they failed to disclose in their annual tax returns and offer the taxman free access to their records, computers, and mobile phones.
This was the verdict of a High Court judge after he dismissed a suit challenging sections of the tax law that offered KRA unfettered access to people’s premises, records, and devices as well as the need for the taxpayer to provide the information when required.
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