Taxman demands Sh14bn from KAA in unpaid taxes
Times Tower, the Kenya Revenue Authority's head office in Nairobi.
What you need to know:
- In disputes with several contractors, the KAA has had to turn to the High Court for rescue.
- There are other cases where different companies are demanding millions of shillings from KAA.
The Kenya Airports Authority (KAA) faces pressure to pay contractors and the taxman Sh13.8 billion in unpaid taxes and contract breach claims, stalling several projects.
By the end of June last year, the KAA acknowledged the claims as part of its contingent liabilities after several courts ruled against it.
There are other pending court cases where different companies are demanding hundreds of millions of shillings in compensation, which portends more fiscal burden.
In its 2022/23 annual report, KAA notes that it is currently before the Attorney-General with the Kenya Revenue Authority (KRA), which submitted a tax assessment claim of Sh4.2 billion on air passenger service charge (APSC) for the years 2014 to 2016.
“The Authority has objected to this tax assessment on the grounds that APSC is a statutory charge collected by KRA and remitted to KAA and is therefore not subject to tax,” KAA notes.
In disputes with several contractors, the KAA has had to turn to the High Court for rescue, after arbitration tribunals awarded two contractors more than Sh600 million for contract breaches.
Seeking compensation
In one of the matters, which is now before the High Court, emergency sourcing and supplies firm, Relief & Mission Logistics, is seeking Sh719.7 million as compensation for the termination of a contract for concession agreement for passenger transfer services at Jomo Kenyatta International Airport (JKIA) in May 2015.
The KAA rushed to the High Court following a Sh221.7 million arbitral award to the company, which remained unpaid by June 30, 2023.
“The Attorney-General's legal advisory was issued on May 3, 2021 advising the Authority to set aside the award. The Authority has filed an application at the High Court to challenge the award and is seeking to set aside the same,” KAA notes.
In another matter, a tribunal also awarded Baseline Architects Ltd Sh404,870,293 in 2013, though KAA has been fighting the ruling since, and is asking the High Court to set it aside.
Germany-based manufacturer of tents and temporary buildings, Roder Hts, is also claiming Sh156 million for unpaid works, extension of time, demurrage charges, and interest on delayed payments. The arbitration proceedings are yet to commence.
This is besides a Sh2.4 billion claim by professional, confidential bookkeeping services firm, Catic, “relating to works done on JKIA's apron stands, arrival and departure terminals (TIA) and interest thereon”, KAA notes.
Eviction of families
The Authority also says that it faces the risk of paying Sh766.25 million in a case with Mitu Bell, a welfare society, over the eviction of thousands of families from Mitumba village, which was located near Wilson Airport in 2011.
“The High Court ruled in the plaintiffs' favour and held that KAA had illegally evicted the plaintiffs and demolished their houses and further that the Authority should acquire alternative land for the displaced people. The Authority successfully appealed the High Court decision and the judgement was set aside. The plaintiffs have made an application before the Supreme Court seeking to challenge the Court of Appeal's decision. The plaintiff's claim for compensation is Sh766,250,000,” KAA notes.
Other than the above claims, KAA is also facing disputed pending contracts claims to the tune of Sh3.2 billion, mainly one from Chinese state-owned hydropower engineering and construction company, Sino Hydro Corporation, which is demanding Sh1.5 billion relating to unpaid works and disputed taxes for the runway capacity, upgrade and rehabilitation of aircraft pavement works at JKIA.
The KAA also notes that the engineering and project management services firm, Doch Company Ltd, submitted a Sh955 million claim over the termination of a contract for the refurbishment of Nanyuki Airstrip.
“The contractor seeks a declaration that the termination of the contract was unlawful, null and void with no legal effect and an injunction restraining the Authority from continuing with or carrying out any civil works at the airstrip. The matter is under arbitration,” KAA says.
