The Minimum Tax has been a subject of hot debate since its introduction in 2020.
But what is the Minimum Tax?
The Minimum Tax in Kenya was introduced in 2020 through an amendment to Article 12D of the Finance Act. The amendment introduced a minimum tax of 1% on gross turnover for companies.
The aim of the amendment was to create a level playground for all businesses, where even those making losses are required to pay the tax. The Kenya Revenue Authority (KRA) argued that some companies were using the absence of the provision to evade taxes.
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However, since the approval of the act, it has never come into effect due to a protracted battle pitting the taxman and individuals affected by the provision.
As such, some Kenyans moved to the High Court to push the stoppage of the implementation of the new clause. In 2021, the High Court in Machakos declared the clause unconstitutional, compelling the KRA to move to the Court of Appeal seeking the reversal of the High Court’s decision.
To the disappointment of KRA, the Court of Appeal withheld the High Court’s decision terming the levy unconstitutional. KRA’s appeal was based on the fact that the High Court failed to appreciate the concept of double taxation, among other issues.
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