Reprieve for ports authority in Sh1.9b tax battle with KRA

The High Court has handed a major reprieve to the Kenya Ports Authority in a vicious court battle with the Kenya Revenue Authority regarding a Sh1.9 billion tax case.

The two government agencies are battling over the tax from money paid by KPA to purchase crane machines and tag boats.

KRA slapped KPA with a Sh1.9 billion agency notice and went ahead to freeze KPA’s accounts in seven banks.

However, Justice John Mativo on Thursday lifted the freeze after KPA sued the taxman complaining that the move had grounded its operations.

“The leave so granted on May 17, 2022, does operate as a stay of issuance of any other or further or future agency notices to the applicant's bankers; Standard Chartered Bank (K) Ltd, NCBA Bank, Kenya Commercial Bank, Equity Bank (Kenya) Ltd, and Diamond Trust Bank, Co-operative Bank of Kenya Limited and Citi Bank by the first respondent (KRA) in respect of funds due and payable to the applicant (KPA) pending the hearing and determination of the substantive application herein,” ruled Justice Mativo.

KPA lawyers Cecil Miller and Ann Kaguri told the court that KRA had jumped the gun since it had not responded to the objection raised against the tax demand as required by the law.

Mr Miller submitted that KRA has acted illegally, adding that KPA risks being grounded if the court does not intervene.

“The applicant stands to suffer irreparable damages. If the court does not intervene as a matter of urgency, then the agency notice by the first respondent will have extremely dire consequences on the applicant’s operations and will lead to the ultimate shutdown of the applicant’s business,” argued Miller.

He said the 'siblings' fight is likely to spill to the East African region as KPA operations also touch on Uganda and Rwanda.

He also stated that KRA has frozen KPA’s accounts twice in a span of a month. The first time, the court heard, was on May 7 targeting its accounts at Co-operative Bank and Citi Bank.

Miller further stated that KRA subsequently unfroze the two accounts before unleashing the second notice 10 days later.

“The applicant is a strategic organisation both nationally and regionally and whose functions include and are not limited to regulation of ports in the country. The agency notice will completely paralyse operations of the applicant to the detriment of the country and the region,” he argued.

The court heard that KPA bought the cranes and the salvage tug boats from Toyotsu Tsusho Corporation and Med Marine Kilavuzkul and which sparked the tax battle. 

Its lawyer told the court that KPA was yet to see the new KRA notices as it learnt on May 17, 2022, at 3 pm that its accounts had been frozen again.

According to KPA, the commissioner of tax ought to have also raised his objection or conceded to the KPA’s objection within 60 days.

If the two would not have agreed, the dispute ought to have spilt to the tax appeals tribunal.

KPA now wants the court to lift the notices issued to seven of its bankers on May 6th and May 16th, this year.

This article was written by The Standard on 20/5/2022.