The High Court in Machakos has barred the taxman from implementing and enforcing minimum tax on Kenyan businesses.
Justice George Odunga made the decision after finding that section 12D of the Income Tax Act is unconstitutional.
The suit had been filed at the Machakos High Court by the Kitengela Bar Owners Association. The petition against the National Assembly, the Kenya Revenue Authority (KRA) and Attorney-General Paul Kihara Kariuki sought to have the levy declared unconstitutional.
Minimum tax would have been applicable to all businesses, regardless of whether they make a profit or not.
The National Assembly had last year amended the Income Tax Act to give KRA powers to collect minimum tax starting January, 2021.
Minimum tax, along with other levies, was part government’s plan to widen its revenue base by introducing new tax measures. It required persons or companies, whether making profits or losses, to pay a minimum tax of one per cent.
The controversial tax, which was introduced through Finance Bill 2020, sought to have companies making revenues of at least Sh50 million pay 1 per cent of their gross turnover, irrespective of whether they make profits or losses.
Business stakeholders had faulted the government for introducing a new tax regime at a time when firms and the economy in general are struggling due to disruptions caused by Covid-19 pandemic. BY DAILY NATION