Court lifts KPA accounts freeze in Sh1.9bn tax row

The High Court has lifted an order barring the Kenya Ports Authority (KPA) from accessing its seven bank accounts over a Sh1.9 billion tax dispute with the Kenya Revenue Authority (KRA).

Justice John Mativo lifted the order temporarily on Thursday following a request by the KPA, which said its operations were at risk of stalling without access to its funds in the accounts.

“If the court does not intervene as a matter of urgency, then the agency notices by KRA (to the banks) also have extremely dire consequences as to the KPA’s operations. The agency notices will lead to ultimate shut down of the KPA’s business both locally and regionally and paralysing business globally,” KPA lawyer Cecil Miller told the court.

The order had been issued on Monday freezing KPA’s accounts at Standard Chartered, NCBA, KCB, Equity Bank, Diamond Trust Bank, Co-operative Bank and Citibank.

The KRA had also issued the banks with agency notices in respect of funds held in the accounts to allow it to collect the alleged defaulted taxes amounting to Sh1.99 billion.

This prompted the KPA to file the urgent request on Thursday asking the court to temporarily lift the order.

The judge said the temporary order unfreezing the accounts will remain in force pending the hearing and determination of the application filed by the KPA against the KRA decision.

Mr Miller said the taxman moved to freeze the bank accounts before responding to the KPA’s objection to the tax assessment as required by the Tax Procedure Act.

He told the court that the dispute relates to a payment of Sh1.99 billion made to Toyota Tsusho Corporation and Med Marine Kilavuzkul for procurement of a project described as ‘associated infrastructure expansion programs’ to improve operations at the Mombasa port.

The payment was also for the supply of port equipment such as ship-to-shore gantry cranes, rubber-tyred cranes and salvage tug boats, which were imported.

The dispute started last year after the KRA demanded payment of the sum on withholding income tax assessment from the Mombasa Port Development Project’s phase 11 financed by the Japan International Cooperation Agency. The money was paid to the contractor, Toyo Construction Company Ltd.

The KPA opposed and filed a case at the Tax Appeals Tribunal last year but the tribunal ruled in favour of the taxman.

This article was written by Business Daily on 20/5/2022.