• Say agency notices were issued prematurely before affording them an opportunity to challenge the tax demanded in accordance with the Tax Procedures Act.
• SportPesa says KRA is engaged in a pattern of raising agency notices with a view to illegally extorting taxes from them at all costs.
Two betting giants, Betin Kenya and SportPesa Ltd, are contesting KRA's claim that they collectively owe Sh14 billion.
In separate petitions at the High court, the companies want the court to suspend the notices issued by KRA against them until their cases are determined.
"It is evident KRA is engaged in a pattern of raising agency notices with a view to illegally extorting taxes from them at all costs," SportPesa says in its documents.
Betin Kenya,, which operates under Gamcode Ltd, allegedly owes KRA Sh11,906,505,579 for October 2018 to February 2019. SportPesa, which operates under Pevans East Africa, allegedly owes Sh3,296,532,000 for the month of April 2019.
The two betting companies have denied owing the taxes, arguing that KRA's decision could affect their businesses and they would suffer irreparable losses.
KRA allegedly wrote notices to Safaricom and their banks demanding huge sums.
SportPesa says that KRA did not carry out any assessment before issuing the demand.
"The funds held by Safaricom belong to individual players who placed bets through SportPesa. Those funds do not belong to and are not held by Safaricom on behalf of SportPesa" the application reads.
Through its lawyer Kamau Karori, SportPesa said that the demand letter was not preceded by an assessment as required by Section 50 of the Tax Procedures Act.
“The agency notices were issued prematurely before affording them an opportunity to challenge the tax demanded before the Tax Appeal Tribunal in accordance with the procedure set out in the Tax procedures set out in the Tax Procedures Act,” Karori says.
In an affidavit filed by CEO Ronald Karauri, the company says that the effect of charging withholding tax on both the stake placed by the punter and the winnings amounts to taxing the punter twice since the stake constitutes income which has already been taxed.
Karauri says they have been denied the opportunity to object to the demands and avail themselves of the dispute resolution mechanisms under the Tax Procedure Act.
“The business is cash-based meaning that it relies on its accounts for all the operations, so by the said agency notices, they cannot access their funds that of its customers,” petitions reads in part.
Karauri further states that as a consequence of the agency notices, they now face the imminent risk of ceasing to operate on the basis of illegal agency notices. If the situation persists, the outcome of the application filed herewith would have been rendered useless.
“The said conduct amounts to abuse of office and misuse o power and I therefore verily believe that they should be held personally liable for the costs of these proceedings on account of their blatant disregard of the law,” the petition reads.
Betin says that in the current situation and on account of the impugned agency notices, it will be unable to undertake basic functions including payment of salaries or meeting its other financial obligations to suppliers and other service providers.
As a result of the KRA actions, Betin pay bill accounts have been frozen by Safaricom and it is currently unable to trade and all the operations have been grounded to a halt as a result of the "illegal Agency Notice".