Pay TV firm takes KRA to court over Sh125 million tax demand

Kenya Revenue Authority is involved in a tax dispute with Wananchi Group.  NATION

By PAUL JUMA pjuma@ke.nationmedia.com

In Summary

• According to Revenue Officer Kamau Kamau, the group imported decoders and internet modems installed at Zuku users’ premises which did not qualify for the remission granted by the minister, between October 2009 and March 2012.

A pay television provider has taken Kenya Revenue Authority to court over a Sh125 million demand on imported equipment.

In papers filed at the High Court, the Wananchi Group, provider of Zuku pay television, says that if KRA is allowed to collect the demanded sum, its operations would be crippled and it would suffer irreparable losses.

The Wananchi Group, which operates pay television and broadband internet services in Kenya and Tanzania, becomes the latest corporate in Kenya to fall on the taxman’s net as KRA pushes to meet an ambitious tax collection target set by the Treasury.

Government expect KRA to collect over Sh839 billion in tax revenue by June 30 for financing the increasing budgetary expenditure.

On its part, KRA accuses Wananchi group of failing to comply with conditions of tax deduction imposed on it by the law.

Remission granted

According to Revenue Officer Kamau Kamau, the group imported decoders and internet modems installed at Zuku users’ premises which did not qualify for the remission granted by the minister, between October 2009 and March 2012.

“The non-qualifying goods were accessories which the minister had clearly stated did not qualify for remission,” he states in an affidavit filed in court. “The total VAT remitted in respect of these non-qualifying goods is Sh124,866,299.”

KRA wrote to the company in March 2012 demanding payment of the sum. The company replied that the goods classified as accessories were capital items which qualified for remission.

Hearing of the dispute is yet to begin as parties are scheduled back to court next month to take a hearing date. The taxman’s attempt to have the company deposit security for the demanded taxes pending determination of the dispute has been rejected by the court.

Tax compliance
In February, the court granted the Zuku provider leave to challenge the decision of KRA’s commissioner for investigations and enforcement to demand Sh124,866,299 in Value Added Tax for goods imported in the country.

Due to increased efforts by the KRA to enforce tax compliance, it has had to fight numerous legal suits lodged by companies that disputed some tax demands.

The court recently allowed the taxman to attach assets of Cut Tobacco Kenya Limited to recover Sh240 million in tax arrears.

Four Coca Cola bottling companies suffered the same fate last year when the court declined to stop KRA from collecting Sh5.6 billion in tax arrears. The bottling companies are challenging the decision at the Court of Appeal.

A similar matter between KRA and Geothermal Development Corporation, involving a tax demand of Sh635 million, has been in court. However, the company obtained a reprieve after the court ruled last month that KRA did not issue a proper notice to the firm.