President Ruto’s administration proposes the re-introduction of the minimum tax on businesses to meet revenue targets.

President Ruto’s administration proposes the re-introduction of the minimum tax on businesses to meet revenue targets.

The National Treasury has proposed the re-introduction of the minimum tax that was declared unconstitutional under the administration of former President Uhuru Kenyatta.

The Treasury suggested the implementation of the tax in a draft plan titled “Medium-term Revenue Strategy 2024/25 – 2026/27” to enable the Kenya Kwanza government to achieve its revenue targets.

The Treasury claims that many Kenyan companies falsely declare negative returns in a bid to evade tax payments.

National Treasury says the introduction of a minimum tax would help curb the evasion of tax by businesses.

“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 due to the fact that some entities prepare their accounts to depict 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 tax proposed is based on gross turnover and not gains or losses.

This is to say that businesses will be mandated to submit 1 percent of their gross turnover to the tax man regardless of the state of their yield.

The said tax was declared unconstitutional in 2021 by the High Court which ruled that it offended the principles of public finance itemized under Article 201 (a)(i) of the Constitution.

Consequently, the Court prohibited the Kenya Revenue Authority (KRA) from further implementation or enforcement of Section 12D of the Income Tax Act by collecting or demanding payment of minimum tax.

Taxman then moved to the Court of Appeal to challenge the ruling. 

However, the appellate court dismissed KRA’s case for lack of merit.

Similarly, in January this year, the taxman issued a statement saying that they would move to the Supreme Court to overturn the high court’s 2021 ruling.

A few months later in July, KRA withdrew the case denying ever intending to file it in the first place.

“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.

President Ruto’s administration proposes the re-introduction of the minimum tax on businesses to meet revenue targets.