Ruto Revives Controversial Uhuru-Era Tax
The National Treasury has proposed reinstating the minimum tax that was declared unconstitutional during the administration of former President Uhuru Kenyatta.
The Treasury proposed the introduction of the tax in a draft proposal titled “Medium-term Revenue Strategy 2024/25 – 2026/27” so that the government could meet its revenue generation goals.
Several Kenyan enterprises, according to the Treasury, file false negative tax returns in an attempt to evade tax payments.
The implementation of a minimal tax would aid in preventing this.
“Minimum Tax 39. The Government recognizes the need for an entity to pay a minimum tax to facilitate the Government to achieve its objectives. This is because some entities prepare their accounts to depict a perpetual loss position thus evading taxation. To ensure fairness in the taxation of income, the government will redesign the minimum tax taking into account the issues raised by the Court on the previous minimum tax,” Treasury’s proposal read in parts.
The proposed tax is based on actual revenue, not profits or losses.
ALSO READ: Car Owners Face New Wealth Tax Proposal
This means that regardless of their yield, businesses will be required to submit 1 percent of their aggregate revenue to the taxman.
In 2021, the High Court ruled that the tax in question was unconstitutional because it violated the principles of public finance outlined in Article 201 (a)(i) of the Constitution.
Therefore, the Court prohibited the Kenya Revenue Authority (KRA) from further implementing or enforcing Section 12D of the Income Tax Act by collecting or requiring minimum tax payment.
The revenue collection agency then appealed the ruling to the Court of Appeals. The appeals court, however, dismissed KRA’s case for lack of merit.
Similarly, in January of this year, the taxman announced that they would petition the Supreme Court to reverse the high court’s 2021 decision.
A few months later, in July, they withdrew the lawsuit and denied ever intending to submit it.
“Truth is that we never filed anything at the Supreme Court regarding minimum tax. We contemplated and even issued a statement but never proceeded,” a source said to the Business Daily.
Ruto Revives Controversial Uhuru-Era Tax