Private sector says unfavorable taxation not good for businesses.

 

Recent court rulings against companies will affect the investment environment in the country, according to stakeholders.

The Kenya Private Sector Alliance (Kepsa) chief executive Carol Kariuki says a recent ruling ordering four Coca-Cola bottlers to pay Sh5.6 billion to the Kenya Revenue Authority (KRA) has far-reaching implications for the operations of businesses.

“What makes it interesting is its ramifications; consequences that could not only include the closure of these businesses so as to honour the ruling but spread to affect the businesses of other private sector players,” she says.

Last month, a court directed Coca Cola bottling plants to pay Sh5.6 billion tax arrears to the country’s taxman.

But Judge Isaac Lenaola turned down Coca Cola’s petition to overturn the ruling and ordered them to pay the taxman the arrears, penalties and interests, which Ms Kariuki finds unfortunate.

Five times

“The very fact that Kenya’s customs and excise tax laws have changed five times in the last decade points to a bigger issue here: that tax laws appear to be set without consideration of their long-term impact on both businesses and consumers,” she said.

When he was Finance minister in 2004, David Mwiraria changed laws and subjected the cost incurred in cleaning returnable bottles together with soda production expenses to excise tax, which is based on the total cost of production.

The Mwiraria law was then changed in 2010 in favour of beverage manufacturers who use returnable bottles.

During an audit conducted by KRA in 2010, it discovered that the four bottlers had not paid the excise tax on returnable bottles and crates during the years when the law was in force.

The firms said they had overlooked the 2004 Mwiraria law because they were entitled to legitimately expect that the cost of returnable containers would remain excluded from the computation of excise tax

 

SOURCE : Sunday Nation.

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