Kenyan commercial banks have warned of potential billions in backdated excise tax liabilities if legal challenges to the 2018 tax regime face delays, according to court filings. The Kenya Bankers Association (KBA) argued before Justice Weldon Korir that merging their case with activist Okiya Omtatah's challenge could force them to absorb costs for transactions between July 1 and September 28, 2018.
The KBA's legal team, led by Kenneth Fraser, emphasized that prolonged litigation would complicate recovery of excise duties from customers. "The more the delay, the more difficult recovery will be," Fraser stated, citing risks of bearing costs for the 19-day period before the tax's suspension. Banks also highlighted technical challenges, noting that modifying banking systems to implement the 0.05% excise duty on transactions over Sh500,000 would take at least two months.
The 2018 Finance Bill introduced a 0.05% excise duty on transactions exceeding Sh500,000, alongside a 12% tax on mobile money transfers and increased kerosene levies. The Attorney General's office had urged consolidation of cases, arguing similar legal arguments between the KBA and Omtatah's petition. However, banks maintained that Omtatah's case lacked sufficient strength to justify merging proceedings.
Several institutions had already notified customers of potential deductions in 2018, should the High Court rule the tax applicable for the suspended period. The dispute centers on whether banks should bear responsibility for collecting duties during the 19-day gap before the tax's implementation was halted. A 2016 photo of Post Bank's headquarters underscores the financial sector's ongoing regulatory challenges.
