The Kenya Revenue Authority has lost its attempt of acquiring more than Sh500 million from a law-abiding rice importer. The rice importer was accused of tax evasion by the KRA. The Court of Appeal judges, William Ouko, Gatembu Kairu and Fatuma Sichale have made a halt to the importation of rice by the accused. The judges found out that the KRA’s trade and Simba system and its employees miscalculated the tax to be paid in 2007.
Evidence presented to the judges showed that the firm had asked for clarification from KRA on duty to be paid. The KRA confirmed that it was to pay Sh228 million. The KRA came four years later claiming that an error had been made. It went ahead to state that the Trade and Simba system led to export trading paying less amount than required.
KRA made a new duty to be paid which was much higher than the initial amount presented. They gave the firm a Sh378 million to be paid as tax and a penalty of Sh228 million.
The Court decides
The judges made a statement saying that KRA’s attempt in disowning the receipt that was unreasonable. The receipt had the KRA stamp and the act of denying the letter suggested that a lot more goes on when it comes to tax payment. The judges went ahead and questioned whether it takes four years to detect an error even after it was already pointed out sooner.
Export Trading made a complaint that the KRA had given it a penalty of 75% on tax. This was done four years after it had paid its dues and had sold the rice. The firm stated it had paid 35% of tax in 2017 as KRA had initially demanded.
The KRA defended itself saying there was a technical error causing miscalculation in tax to be paid. It went ahead to state that the Simba system is owned by a Senegalese organization, thus involvement needed time to be effective.
Despite fault acknowledgement by KRA, it still accused Export Trading of not confirming the country of origin of the rice. This had thus caused a wrong import tax between 2007 and 2009.
The judges agreed with the firm saying it was unfair for KRA to demand tax four years later. They went ahead to argue that a taxpayer cannot store a commodity waiting to know the tax they will be required to pay.