This is after the Kitengela bar owners association had filed a petition in court challenging its legality. The bar owners sought for the court to grant interim conservatory orders as a way of preserving their businesses.
In his ruling, Justice George Vincent Odunga of the Machakos High court ruled in favour of the bar owners association and suspended the minimum tax.
“I find that this is an appropriate case for KRA to â€œhold its horsesâ€ for the time being as this Court navigates through the labyrinth of the respective contentions made by the parties herein,” Justice Odunga ruled.
He added that the implementation of the law would oppress millions of Kenyans who rely on Small and Medium-Sized enterprises as their source of livelihood.
Justice Odunga affirmed that the minimum tax would be suspended until the matter is finally determined in court.
“The death of a business is certainly not damage that can be remedied by way of damages.
“As such, it is in the interest of Justice that the Honourable Court grants interim reliefs at the very least to preserve the businesses and livelihoods of the Kitengela bar owners association and millions of SMEs pending the hearing and determination of this Application and Petition,” the judge stated.
Minimum tax, which came into effect on January 1, 2021, was introduced by KRA under the Finance Act 2020 in a bid to encourage equity and fairness in the tax system.
According to the tax authority, the Minimum Tax applied to all businesses, whether they made a profit or not. KRA charged one per cent of the gross sales for all businesses.
The authority noted that the introduction of the minimum tax would net more businesses into the tax bracket as well as collect more revenue in order to achieve the Ksh1.57 trillion target for the financial year 2020/21.