The High Court has blocked the National Treasury from collecting Kes900 million from the NCBA Bank in a tax dispute.
This is as it considers a petition by the bank against the Cabinet Secretary for the National Treasury and the Attorney General.
Lady Justice Mugure Thande gave the order after the bank petitioned the court High Court to intervene in a dispute between it and the National Treasury after the current Cabinet Secretary for the National Treasury recently revoked an exemption granted when the bank merged in 2019.
“I am satisfied that the application has met the test for the grant of conservatory orders at this ex parte stage. Accordingly, Prayer 2 of the application (for conservatory orders) is hereby granted,” Thande said.
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The bank was instructed to serve the Attorney General and Cabinet Secretary by May 5, submit responses by May 19, file additional affidavits by June 2, and have the subject discussed for directions on June 6 after the judge declared the case as urgent.
The NCBA claims in the complaint it filed today with the Constitutional Division that the revocation and any subsequent demand for the tax violate its fair expectation that judgements made by a government entity will be final as specified in Article 47 of the Constitution.
On March 24, 2023, NCBA and the Kenya Revenue Authority received a letter from the Cabinet Secretary for the National Treasury purporting to revoke the agreement. The Cabinet Secretary instructed the Kenya Revenue Authority to obtain payment from the bank for the exempted taxes in the letter.
The bank requested in its submission that the court grant conservatory orders preventing the Kenya Revenue Authority from collecting the previously exempted capital gains taxes on behalf of the National Treasury. The cash in question is thought to be around Kes 900 million.
“The purported revocation is in breach of basic rules of natural justice as envisaged by the provisions of Article 47 of the Constitution, especially since the Petitioner (NCBA) was not given an opportunity to be heard before such an unprecedented reversal of an earlier decision was made,” said Senior Counsel Kamau Karori, the lawyer representing the bank in the case.
The NCBA contended that the action could undermine investor and public confidence in the finality of decisions made by government institutions by arbitrarily withdrawing a justifiable exemption given through due procedure.
