Yatani: Odunga ruling halting minimum tax has left a Sh21bn budget deficit

NAIROBI, Kenya Sept 30 – National Treasury Cabinet Secretary Ukur Yatani says the High Court ruling halting the collection for minimum tax on corporate sales by the Kenya Revenue Authority has resulted in a Sh21 billion deficit of this year’s national budget.

Yatani told the Senate Committee on Labour and Social Welfare that the Ministry is mulling introducing further austerity measures that will require ministries, state departments and agencies to revise their budgets.

“We have gone through some turbulence with the courts where they have stopped the charging of the minimum tax that will create a whole of Sh21 million in our budget. It is clear that we are even going to revise some of the budgets in the ministries, Parliament and even the Judiciary because we have to become as realistic as we can,” the National Treasury CS stated during a session on Thursday.

The ruling by Justice George Odunga came as a relief for companies that were wary of paying the 1 per cent levy on total sales from the beginning of 2021, even while coping with the economic fallout from the coronavirus pandemic.

The government is looking to raise money to fund its Sh3.03 trillion budget to help with the recovery from the pandemic following an economic contraction in 2020, the first in nearly three decades.

The High Court in Machakos on September 20, declared Section 12D of the Income Tax Act unconstitutional for violating Article 201(b)(i) of the Constitution.

The court held that the minimum tax was subjecting taxpayers to double taxation and was punitive in nature.

Judge Odunga was of the opinion that taxation cannot be fair when a system of tax is introduced to diminish the capital of a business.

The Kenya Revenue Authority disagreed with the findings of the court and served a notice of appeal to the Court of Appeal to challenge the finding by Justice Odunga.

“This is to ensure that KRA continues to review and improve on tax policies in order to reduce the tax burden while ensuring that every citizen contributes their fair share of tax,” the tax agency said in a statement issued in response to the ruling.

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