BY JOAN WANJIKU,NAIROBI,20TH SEPT,2021-The High Court has declared the minimum tax, which was to be levied on small businesses at the rate of 1% of turnover, unconstitutional and stopped its implementation.
In his ruling, Justice George Odunga also issued orders barring the Kenya Revenue Authority (KRA) from further implementing or enforcing the provisions of section 12d of the Income Tax Act, which states that “where a person’s Instalment Tax payable is lower than the Minimum Tax, then the Minimum Tax shall be payable.”
The move has offered reprieve to businesses who had decried heavy taxation.
In April this year, the High Court in Machakos granted conservatory orders restraining the KRA from enforcing provisions of the minimum tax pending the hearing and determination of a petition challenging it that had been filed in court.
The minimum tax was introduced under the Finance Act 2020 and was effective from January this year, charged at the rate of one per cent of the gross turnover of a business.
A petition filed by Kitengela Bars Association had sought to declare the implementation of the tax as unlawful and unconstitutional.
On Monday morning, the High Court declared provisions of the minimum tax, unconstitutional and the minimum tax guidelines void.
Justice Odunga ruled that minimum tax has the potential of subjecting Kenyans to double taxation and also unfairly diminishes capital for those making losses while businesses making profits the capital base are unaffected.
He ruled that minimum tax should be precise and should only target the intended.
The move has been welcomed by business owners who say implementation of the minimum tax would have had a devastating impact on businesses that are already reeling from the effects COVID-19.