The High Court has shot down a plan to levy a minimum tax of 1 percent on total sales of companies, saying it was unconstitutional.
The High Court has shot down a plan to levy a minimum tax of 1 percent on total sales of companies, saying it was unconstitutional. This now gives a reprieve to businesses that had been left hopeless with the numerous taxes by the government.
The tax, which was due to take effect at the start of 2021, is now annulled, Judge George Odunga ruled on Monday. “It results in diminishing capital for those making losses, while for those making profits the capital base is unaffected,” he said.
Business owners who challenged the new tax in court said it was “unconstitutional, unlawful and devastating.” The measure could have raised about 21 billion shillings ($190 million) for the Treasury annually, according to lawmakers. It was meant to ensure companies that perennially report losses also contribute to government programs, they said.
In April this year, the High Court has today granted an injunction against the implementation of the Minimum Tax.
Justice George Odunga sitting in Machakos stated that “… I grant conservatory orders restraining the 2nd Respondent Kenya Revenue Authority (KRA) whether acting jointly or severally by itself, its servants, agents, representatives or howsoever otherwise from the implementation, further implementation, administration, application and/or enforcement of Section 12D of the Income Tax Act, Chapter 470 of the Laws of Kenya as amended by the Tax Laws (Amendment) (No.2) Act, 2020 by collecting and/or demanding payment of the Minimum Tax pending the hearing and determination of this Petition.”
The case, filed in Machakos by Kitengela Bar Owners Association through their lawyers Okwach & Company Advocates, has raised similar issues to the suit that had been filed last month by the Kenya Association of Manufacturers, Retailers Association of Kenya, and Kenya Flower Council in Nairobi.