The Kenya Association of Manufacturers (KAM) has lauded the ruling by the High Court to declaring the minimum tax provisions unconstitutional and the minimum tax guidelines void.
KAM Chairman Mucai Kunyiha says the move now ensures that businesses that have been affected by the COVID-19 pandemic will remain open and bounce in order to generate the much-needed revenue to support our country.
“This historic decision by the courts today provides much-needed relief to businesses that continue to strain under the weight of over-taxation and unpredictability in the country today,” said Kunyiha.
The ruling delivered by Justice George Odunga on Monday has further barred the Kenya Revenue Authority from further implementing or enforcing the provisions of Section 12D of the Income Tax Act.
The minimum tax which is payable at the rate of 1% of gross turnover, came into force on January 1, 2020, under the Finance Act 2020.
Kunyiha added, “Being a Turnover based tax means that the Minimum Tax is not based on the affluence of a business, usually measured by the bottom-line. Therefore, the businesses that would have been affected by the Minimum Tax are, Low margin businesses such as those dealing with Fast Moving Consumer Goods, Capital intensive businesses with tax incentives, new businesses and loss-making companies.”
KAM further says broadening the tax base to shore up revenue should be done without burdening businesses that are still reeling from effects of the coronavirus pandemic.
The petition was filed by Kitengela Bar Association with the Institute of Certified Public Accountants of Kenya (ICPAK), Kenya Flower Council, Retail Trade Association, and Isinya East Sub-County Bar Owners Association, and the legal team Anjarwalla & Khanna Advocates and Okwatch and Company Advocates being enjoined in the case.