We briefly looked at the un-harmonized tax policies recently introduced and causing jitters between the taxpayers and the Kenyan taxman in this article. Diving deep into the details, let’s peruse through some of these policies to find out the “devil” in them the saying goes, “the devil is always in the details”.

1. Withholding tax on winnings

Betting firms have stuck out their guns claiming mis-interpretation by Kenya Revenue Authority (KRA). The former has been withholding 20% of the positive difference between winnings and the staked amount and later remitting it to the taxman while KRA is of the view that 20% withholding tax should be on all the money in the gamblers e-wallets.

 

2. Housing Levy

Delays by court injunctions and admission have seen this fail to kick off after public outcry on the announcement of its implementation. Ironically, the rush in implementation of this controversial fund would have seen contributors enjoy up to shs. 9,000 monthly tax relief being almost four times the maximum of shs. 2500 an employee is allowed to contribute. This was however amended through the Finance Bill 2019 by then National Treasury Secretary Henry Rotich capping monthly relief at 15% of the monthly contributions.

 

3. Robinhood Tax

Introduced on the 2018/2019 budget reading by CS Henry Rotich, this new tax was to compel residents withdrawing and transferring any amounts from and above shs. 500,000 through banks or other financial institutions to pay 0.05% of the transaction value. Resisted by the Kenya Bankers Association (KBA) through the courts and saw its suspension due to “bank transfer” in the policy being vague. Lack of public participation and lack of banks’ computer software configuration to deduct the amount also amounted to this policy’s suspension.

 

4. Tax on returnable containers

In July, KRA lost a decade-long case with giant beverages maker, Coca Cola, over tax on returnable containers constituting bottles and crates that was to be applied every time they are refilled with beverages. Three Appellate Court judges ruled that charging a levy every time the bottles are refilled amounted to multiple taxation which was unlawful. KRA had alleged a sum of shs. 5.62 billion excise duty arrears from the company.

 

5. Excise duty on cigarettes

Before 2003, excise duty on cigarettes was determined by production costs incurred by manufacturers but a new tax regime was introduced under which excise duty on cigarettes was to be calculated on the basis of retail selling price. Cigarette maker Mastermind lost a long running battle with KRA over shs. 442.2 million that KRA demanded on its Supermatch brand. The company had argued in court that KRA had erroneously calculated excise duty payable citing ambiguity in reference to a non-existent “5^th column” which the court dismissed. This case brought to the fore lack of refined and water tight tax document that leaves no loopholes for a mischievous taxpayer to dodge taxes.