The government has revoked a tax waiver extended to National Industrial Credit (NIC) and Commercial Bank of Africa (CBA) banks in a 2019 merger that saw the creation of National Commercial Bank of Africa (NCBA) bank.
A letter dated March 24 by Treasury Cabinet Secretary Njuguna Ndung’u directs Kenya Revenue Authority to claim the Capital Gains Tax from NCBA bank.
The revenue agency had on March 16 sought advice from the exchequer on how to handle the matter.
The government has asked NCBA to pay about Kshs 900 million plus interest, calculated at a rate of five percent of the transaction amount.
The Kenyatta family controls about 13.2 percent of NCBA, an entity formed after the merger of the two banks in a share swap.
This slightly surpasses the 11.75 percent stake that the family of the late Phillip Ndegwa owns in the merged business.
Cumulatively, the two families hold a total of 373 million shares valued at Kshs 14.9 billion.
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NCBA managing director John Gachora make it clear that the lender is ready to pay Kshs 350 million if the court rules otherwise.
Yesterday, NCBA petitioned the High Court to intervene in a dispute between it and the National Treasury over the revoked tax exemption.
The bank argues that the purported revocation is not justified and that the Cabinet Secretary acted beyond his powers.
“The purported revocation is in breach of basic rules of natural justice as envisaged by the provisions of Article 47 of the Constitution, especially since the Petitioner (NCBA) was not given an opportunity to be heard before such a draconian reversal of an earlier decision was made,” the lender’s lawyer Senior Counsel Kamau Karori said.
NCBA argues that by arbitrarily revoking a justified notice by the previous administration, the current administration would damage the confidence of investors and the general public in the decisions of the government.
The bank has asked the court to quash the revocation decision by the exchequer and its agents from implementing the revocation decision and or collecting the capital gains tax.
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