Kenya’s High Court Suspends New Tax on Bank Money Transfers

The High Court has suspended the implementation of the excise duty introduced under the Finance Bill 2018 after the Kenya Bankers Association (KBA) challenged the new tax through a court application.

The Association went to court challenging the fact that the law requiring customers to pay 0.05 per cent on transfers of Sh500,000 or more through banks or other financial institutions was ambiguous. According to KBA, the tax, also known as the Robin Hood Tax, could disrupt business and eventually affect the economy.

KBA now wants the implementation of the Bill halted until all stakeholders can reach an agreement.

In addition, KBA argued in its court application that the Treasury’s decision to introduce the excise duty was not based on public participation as should be the case.

The Ruling

Justice Wilfrida Okwany ruled that duty on money transferred through banks is an important matter that cannot be subjected to guesswork or individual interpretation. According to her, the implementation of the excise duty is suspended until a definition of “money transferred by banks” is offered.

“I find that the fact that KBA has raised the issue of ambiguity in the law in question calls the attention of the AG and KRA to make a clarification on the issue so as not to leave it to the subjective interpretation of those supposed to implement it,” said the Judge adding that the AG and the KRA should file their responses within 14 days.

The Finance Bill 2018, which came into effect on July 1, introduced several tax amendments which will help the government reach its Sh3 trillion budget. Some of these amendments include the presumptive tax imposed on the informal sector and the Robin Hood tax.

The case will be heard on September 17, 2018.