The Kenya Revenue Authority (KRA) has found itself in a heated legal tussle with Milestone Games, the company behind the SportPesa brand, over the taxman’s bid to grab Sh1 billion from the betting firm out of banks and through telcos.
Tribunal Blocks Cash Grab
The Tax Appeals Tribunal has barred the taxman’s plans to seize cash from five banks – Absa, KCB and Eco Bank among them – as well as telcos Safaricom and Airtel. The Tribunal is saying that KRA was wrong to go ahead and try and collect the Sh1 billion while Milestone Games is still trying to get its appeal sorted.
Trouble started back on April 30th when KRA sent its “agency notices” to five banks and two of the big telcos, trying to get them to cough up some of the Sh1 billion in unpaid excise duty that Milestone Games owes.
What’s An Agency Notice?
An agency notice is essentially a demand from the taxman that tells third parties – like banks or employers – to just stick their hand in the taxpayer’s account and send some cash to KRA to cover a tax bill.
Milestone Games is saying that KRA deliberately timed the notices to come out at 4:00 PM so that they’d land just as the clock was ticking down on the day, and that this was all an attempt to shut the company down and make it hard for them to get to court to sort things out.
Tribunal’s Verdict
The Tribunal told KRA not to proceed and withdraw the agency notices til Milestone Games’ appeal is sorted. “Once a taxpayer’s lodged an appeal about a tax bill, the taxman can’t just go around issuing notices to get the cash til that appeal’s been sorted,” the Tribunal said in its ruling.
The ruling was pretty clear: “We’re saying the agency notices that KRA sent out on 30 April to the banks and the telcos should be called off, straight away,” it said.
A Bit of History
This latest tax row comes seven whole years after KRA first started going after Pevans East Africa, the outfit that was in charge of the SportPesa brand back then, over some unpaid taxes that ended up forcing the company to shut up shop in November 2019.
Pevans East Africa has since sold the SportPesa brand to a UK company called SportPesa Global Holding Limited (SGHL), who then let Milestone Games use the brand in Kenya.
The Nitty-Gritty
Milestone Games went to the Tribunal back in February this year when KRA came after them for Sh1,011,230,716 in excise duty on all the bets customers placed, plus Sh462,991 in withholding tax on the winnings they got for the six months from June 2023 to February 2024.
The company’s basically saying that KRA messed up and didn’t sort their objection to the tax bill in time – which means they can’t actually charge them the tax now. Plus, they’re saying KRA was too slow to make a decision, so it was basically automatic that Milestone Games got to keep their money.
Bad Faith Allegations
Milestone Games is also saying that KRA deliberately set out to cause them trouble by sending those agency notices on a Friday afternoon so that they’d have no chance to stop the cash grab before it was too late. They’re also pointing out that some of these notices went to banks where Milestone Games doesn’t even have an account – which gets to the heart of their “bad faith” allegations.
Legal Reasoning
The tribunal rejected KRA’s jurisdictional objections, finding Milestone Games had filed a substantive appeal raising arguable issues deserving full hearing. The tribunal relied on Section 42(14) of the Tax Procedures Act, which restricts KRA from issuing agency notices when taxpayers have appealed disputed assessments.
“The tribunal affirms that institution of recovery measures ought to be done in strict compliance with the law, hence the same cannot be left to the respondent to whimsically institute and lift agency notices as it so wishes,” the ruling stated, ordering recovery processes suspended until the tax dispute is resolved.