Insurers in bid to block 10pc tax on their services

Association of Kenya Insurers (AKI) chairman Mark Obuya (left) and executive director Tom Gichuhi (right) with Insurance Regulatory Authority chief executive Sammy Makove at the launch of AKI Market Report last August in Nairobi. The insurance industry has moved to court to block the taxman from levying a 10 per cent exercise duty on their services. Photo/File 

In Summary

• Tuesday, however, the industry’s lobby, Association of Kenya Insurers (AKI), obtained a temporary injunction blocking the Commissioner of Domestic Taxes and KRA from collecting the tax.i

The insurance industry has moved to court to block the taxman from levying a 10 per cent exercise duty on their services.

Under the proposed Finance Bill, 2013, the government brought the insurance firms into the bracket of financial institutions whose services are to be levied the 10 per cent duty to help the Kenya Revenue Authority raise Sh973 billion.

Tuesday, however, the industry’s lobby, Association of Kenya Insurers (AKI), obtained a temporary injunction blocking the Commissioner of Domestic Taxes and KRA from collecting the tax.

“Therefore for the time being neither the Commissioner nor KRA can collect payment from insurers until the matter in court is heard and determined,” read a circular signed by AKI’s executive director Tom Gichuhi and directed to all industry players.

KRA had announced it expected banks and insurance companies to remit excise taxes on July 20, 2013 for the period between June 18 and 30.

Affected parties

Parties affected by the Bill are banks, co-operative societies, insurance companies, mobile money transfers and Saccos.

Kenya Bankers’ Association (KBA) was the first group that sought a court redress over the proposed Bill.

Earlier this month, it asked the National Assembly Committee on Finance, Planning and Trade to allow members levy the excise duty from August 1instead of June 18.

“Computer software used by banks is not capable of calculating or charging excise duty in its current state.

In some cases, we will not be able to introduce the new tax system immediately,” KBA chairman Jeremy Awori had said when he met the committee.

The lobby group had carried out consultations with the Kenya Revenue Authority and the Central Bank of Kenya who agreed to the proposed plan of implementation.