Kenya Association of Manufacturers has welcomed the ruling from Machakos High Court that declared the implementation of the Minimum Tax provisions as unconstitutional.
In his ruling made on Monday, Justice George Odunga declared the minimum tax as unconstitutional and bared the Kenya Revenue Authority from further implementation of Section 12D of the Income Tax Act.
The petition had been filed by Kitengela Bar Owners Association.
The Finance Act 2020 that came to effect in January 2021 introduced minimum tax payable at the rate of 1 per cent of gross turnover.
Following the ruling, KAM chairperson Mucai Kunyiha said that the historic ruling provides much-needed relief to businesses that continue to strain underweight of over-taxation and unpredictability in the country.
“It not only ensures that businesses remain open and productive and provides space for businesses to bounce back and generate the much-needed revenue to support our country,” Kunyiha said.
“Being a turnover based tax means that the Minimum Tax is not based on the affluence of a business, usually measured by the bottom lines. Therefore, the businesses that would have been affected by the Minimum Tax are low margin businesses such as those dealing with Fast-Moving Consumer Goods, Capital intensive businesses with tax incentives, new businesses, and loss-making companies.”
The chairperson said that the tax base in the country can be increased by different approaches with minimum negative impact to already struggling businesses.
“Pre-Covid, businesses were already were facing recurrent regulatory and policy challenges that impeded their productivity causing the sector to shrink significantly.”
