KRA wants order on Capital Gain Tax suspended

Kenya Revenue Authority (KRA) wants an order stopping it from seeking Capital Gain Tax suspended.

In a suit filed on Tuesday, the taxman sought the court’s intervention arguing that it will be forced to delink the iTax payment module and the stamp duty thereby causing huge losses.

Through lawyer Pius Nyaga, KRA claimed that it discarded the manual system of filing taxes when it rolled out the iTax payment module thus it does not have an alternative system to deploy to collect both stamp duty and the Capital Gains Tax.

“KRA invites this court to suspend the effect of its March 14 judgment regarding the declaration of invalidity of a section of the Income Tax Act on account of undue hardship that is likely to follow,” said Mr Nyaga.

The suit follows an earlier one filed by the Law Society of Kenya who had moved to court to challenge constitutionality of a section of the Income Tax Act which legalised payment of Capital Gain Tax upon presentation of the transfer instrument as opposed to upon successful transfer of the property.

In the case, Justice Mativo declared the disputed law as unconstitutional and one that unfairly imposes a tax burden on the public.

TAXATION BURDEN

According to KRA, the taxman is bound to suffer twice if the verdict is not suspended since it will mean that the two payment modules will be delinked and they will have to reconfigure the system.

“Court has powers to suspend the declaration of invalidity of a law or a section of a statute in order to grant a party an opportunity to exercise its constitutional right of Appeal to a Superior court,” said Mr Nyaga.

In the initial suit, LSK was not opposed to payment of Capital Gain Tax, but had protested the fact that it was to be imposed on those who acquire properties even before they get full possession of the same which they termed as unlawful.

LSK had also argued that the Capital Gain Tax can only be charged on gains that have accrued in favour of a vendor of property at the time of transfer hence imposing a requirement that the same be paid on an anticipated gain, which has not accrued, amounts to unfairly imposing a burden of taxation.

But the taxman insisted that the Capital Gain Tax had been reintroduced after it was suspended in the country from 1985 and is merely aimed at widening the tax base as well as cater for the increased financial budget of the Government.