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Court orders Portland Cement to pay Sh350m penalty in 30 days

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East African Portland Cement’s factory in Athi River. FILE PHOTO | NMG  

Troubled East African Portland Cement Company (EAPCC) #ticker:EAPCC has been given 30 days to deposit Sh350 million in court as a condition to suspend an order allowing the sale of its property to recover Sh1.4 billion it owes workers.

Court of Appeal judges, while suspending the decree by the Employment and Labour Relations Court on September 14, noted that there are no practical ways for EAPCC to recover the colossal sum from workers in the event its property is sold but gave a stringent condition to the struggling firm.

The Labour Court had on August 2 allowed the Kenya Chemical and Allied Workers Union (Kcawu) to recover the colossal sum that Portland owes more than 400 workers under the 2013–2015 CBA, prompting the firm to seek the Court of Appeal’s protection.

“The applicant must deposit in court or provide a bank guarantee in the sum of Sh350 million being approximately 25 per cent of the decretal sum,” the judges ruled, adding that the said deposit or bank guarantee “shall be provided within 30 days or the conditional stay shall automatically lapse.”

EAPCC had in its application pleaded with judges Martha Koome, Hannah Okwengu and J. Otieno-Odek to suspend the decree pending the appeal, arguing that some of the items attached constitute tools of trade.

Portland said attachment of those tools would cripple its business operations making it difficult to meet its obligations.

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The union, however, urged the court to deny the cement maker any reprieve, arguing that the firm had not advanced any solid grounds in its appeal.

The judges, however, noted that arguable grounds had been established to warrant granting of reprieve even as they maintained that the stay of execution would lapse with EAPCC’s failure to provide the Sh350 million guarantee.

The decree to recover Sh1,401,585,364 emanates from a long-running dispute arising from EAPCC’s failure to fully implement the collective bargaining agreement (CBA).

The said CBA was the subject of a dispute before the Labour Court and the Court of Appeal.

Portland Cement was particularly aggrieved by the court’s directive that it increases the wages of contract employees.

The court held that the contract staff, who were not part of management and are members of Kcawu by payment of union dues, were entitled to benefit from the negotiated CBA.

EAPCC’s argument that there were separate negotiations for non-management workers, some of who were on contract and others not, was rejected.

The Labour Court found that payment of union dues is what makes an employee a member of a trade union.

Portland had conceded that the dues paid to staff on contract are different from that paid to permanent employees though unionisable.

The reason EAPCC advanced for this was that putting the wages on the same level is unsustainable and if implemented would require Sh71.3 million per month that it was unable to raise. EAPCC and Kcawu have negotiated CBAs since 1961. However, the contract employees were not covered by the CBA until 2011.



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Lights, camera, action! Artistes brighten economy

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Covid-19 had negatively impacted entertainment revenues.

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KRA must ease tax filing to boost revenues

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Nikhil Hira Independent tax consultant and Director Bowmans Coulson Harney (law firm). [Courtesy]

Anyone who has been following Kenya’s budgets over the last few years will recall headlines each year saying that the country has set its largest-ever budget. 

The upcoming 2021/22 fiscal year is no exception, with Treasury Cabinet Secretary Ukur Yatani announcing a budget of Sh3.6 trillion – yes, the biggest ever! A little over Sh2 trillion will come from government revenues, with approximately Sh1.8 trillion of this from tax revenues. 

The balance will be borrowed – another common feature of the last few years. 

This year’s budget comes amidst an economic crisis brought on by the Covid-19 pandemic, with the inherent assumption that the pandemic will come to an end before the start of the next financial year. 

Given surges in infections that are being seen globally, and indeed in Kenya, this assumption may well be the deal-breaker. 

The Ministry of Health has already said that Kenya may see another wave of infections in July, fuelled by the Indian variant. This could result in more lockdowns with the associated impact on the economy and indeed revenue collections. The lack of vaccines is an issue that the government must address as a matter of great urgency if the country is to get through the pandemic without further economic woes. 

While deficits in government budgets are not uncommon, Kenya seems to be annually widening the gap between expenditure and revenues. 

If one applies this model to their household budget, the upshot will almost certainly be bankruptcy. 

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What is actually required is curtailing recurring government expenditures, which is something that the government has acknowledged in the past with proposed austerity measures. 

The reality is that Kenya has not succeeded in doing this, and the pressure on revenue collection is exacerbated. 

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When you add to the high level of wastage and corruption we are witnessing, the deficit will almost certainly continue to widen. 

The responsibility for tax collection and enforcement lies with the Kenya Revenue Authority better (KRA). 

There is no doubt that the authority has improved significantly in this task since it was set up in 1995. 

The taxman estimates that 4.4 million tax returns were filed by June 30 last year, up from 3.6 million in the previous year.  While this is a significant improvement, when compared to the country’s population, this number of returns seems unusually low. 

The increase in the number of tax returns, is to a large extent, due to the online reporting system, iTax, and a major push by KRA through taxpayer education.

There is no doubt that the online system has made filing tax returns significantly easier and gone are the large queues of people witnessed at Times Tower on deadline day. 

That said, there is still much to be done to make filing returns a seamless and painless exercise. 

System downtime during filing periods is something that all of us will have experienced, although, in typical Kenyan fashion, we inevitably wait until the last day to file our returns as we do with most things! 

The spreadsheet that one uses to file a return is by no means the simplest to use.  One key issue seems to be that taxpayers are not alerted to changes in the model until they try to upload a return. 

The spreadsheet does not allow one to make it more relevant to their sources of income – in essence, it is too rigid and inflexible. KRA should be able to rectify this without too much effort.

Last year was unusual in that different rates of tax were applicable in the first quarter as compared to the rest of the year.  This followed the Covid-19 relief measures that were introduced in April 2020. 

There was much debate about whether the changes were meant to apply for the whole year or whether some form of apportionment was needed. 

In the end, the decision was made for apportionment. One can argue about what the correct treatment should be, but the issue was how long it took for the decision to be made and, indeed, to amend the iTax system. 

The age-old notion has always been that the more complex and difficult it is to file a tax return, the more likely it will be that taxpayers simply won’t file their returns. While the issue with the system has been resolved, there is an inherent administrative issue here that must be addressed. 

KRA has to be significantly more proactive in dealing with changes in rates and law to ensure the least inconvenience to taxpayers. 

The writer, Nikhil Hira, is the Director of Bowmans Kenya.

The views expressed in this article are the author’s and not necessarily those of Bowmans Kenya  

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The age of gentrification is truly upon our country

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Never mind the businessmen outside Nairobi could be richer. Rural folks aspire to one day moved to a new county (city).

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