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Warning: Several lenders have already warned customers to brace for deductions, depending on suit outcome
They have opposed consolidation of their case challenging so-called Robin Hood tax with that of activist Omtatah, saying it will only drag litigation process.
Commercial banks now want a case in which they are challenging the legality of the tax on all chargeable money transactions introduced last year expedited, fearing backdated charges running into billions of shillings.
The lenders fear they may be forced to pay for the Treasury’s ‘Robin Hood’ tax should their case be consolidated with another case challenging the legality of the 0.05 per cent excise duty for applicable transfers by activist Okiya Omtatah.
While urging the court not to consolidate their case with that of Omtatah’s, the banks under the aegis of the Kenya Bankers Association (KBA) claimed that delays and doubts about the strength of the latter’s case could force them to foot the accrued duty.
This would, in turn, force them to recover the money from their customers for the period from July to September last year.
“If the petition herein is delayed in the manner now proposed, there will be considerable delay. The petitioner (KBA) will be faced with additional demand of excise duty for the period July 1, 2018 and September 28, 2018 and the task of trying to recover the additional excise duty from the customers to whom excisable services were provided,” argued KBA through lawyer Kenneth Fraser.
“The more the delay, the more difficult recovery will be.” Several banks last year warned their customers they would recover the deductions from their accounts should the High Court rule that the levy ought to have been paid for the 19-day period before the suspension. The Attorney General Paul Kihara in his application before Justice Weldon Korir argued that both Okiya’s and KBA’s cases have similar arguments and prayers hence they should be consolidated.
He said this would save both time and money. The Finance Bill 2018 became operational from July 1 last year, but the bankers went the court to delay its implementation until such a time they would reach an agreement on what should be taxed.
“It will be impossible to comply with the new regulations given that the new excise duty will require changes to computer systems operated by banks and the process of altering the computer software to recover the tax will take at least two months,” said KBA.
Under the law, the lenders were required to charge their customers a 0.05 per cent excise duty on transactions amounting to Sh500,000 or more.
Mobile money transactions were, on the other hand, to attract 12 per cent excise tax, up from the previous 10 per cent while Kenya Revenue Authority (KRA) would collect Sh10.31 tax for every litre of kerosene sold, up from Sh 7.21 previously.
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