Why doctor wants churches, mosques to pay taxes on offerings and tithes
In court papers, Dr Gikenyi argues that tithes, offerings and donations should be subject to taxation in line with the constitutional principle of fair tax burden sharing.
For decades, churches and other religious institutions in Kenya have enjoyed tax exemptions on the tithes and offerings they collect, with the law exempting them from paying taxes on these contributions.
But Nakuru-based doctor Magare Gikenyi has filed a petition challenging sections of the Income Tax Act that grant these exemptions.
In a petition to the High Court in Nairobi, Dr Gikenyi argues that Section 3(2) of the Income Tax Act Cap 470 contravenes the Constitution, which requires a fair distribution of the tax burden among all Kenyans and sectors of the economy.
His petition specifically targets Section 13 of the Income Tax Act, which allows certain individuals and entities, including churches, to be exempted from paying income tax.
In court papers, Dr Gikenyi argues that tithes, offerings and donations should be subject to taxation in line with the constitutional principle of fair tax burden sharing.
He is asking the court to declare Section 3(2) discriminatory and unconstitutional, null and void.
In court papers seen by the Nation, the medical practitioner now wants churches to be included in paying taxes, saying Article 201(b) of the Constitution mandates that the tax burden should be fairly shared among Kenyans.
Gikenyi has described Section 13 of the Income Tax Act as discriminatory and contrary to the Constitution because it allows certain groups of individuals and organisations to be legally exempted from the law.
Discrimination
"Tithes, offerings and donations and any other person and entity exempted from taxation, should be subjected to the same because article 201 of the constitution does not anticipate discrimination," he says.
Gikenyi argues that the discrimination of not sharing the tax burden with everyone has increased the burden on taxpayers in Kenya.
In Kenya, tithes, donations and offerings are not considered as gains and profits, employment or rights granted for the use of property or any other form of recognised income under the Income Tax Act.
However, churches are required to file annual returns but are exempt from most taxes under Section 13 and paragraph 10 of the First Schedule of the ITA and the Non-Governmental Organisations and Co-ordination Act.
Paragraph 10 of the First Schedule of the ITA exempts from tax any institution, body of persons or irrevocable trust of a 'public character'.
These include trusts, churches and charities or bodies established for the purpose of relieving poverty or distress of the public or for the advancement of religion or education.
Although churches are exempt from income tax, they are not exempt from tax obligations. Churches are still required to fulfil tax obligations such as filing annual returns and paying PAYE.
Churches are also not exempt from income tax if they earn income from other activities unrelated to their religious activities, such as business income.
In his petition, Gikenyi says some rich people, charitable groups, churches, mosques, temples and some non-governmental organisations are benefiting immensely from the exemptions when they should be contributing to the payment of taxes.
The doctor has also sought an order restraining the government from enacting any law that purports to exempt any person and/or entity from paying income tax.
Respondents in the case
The Attorney General, Treasury and Economic Planning Cabinet Secretary, Kenya Revenue Authority, the Senate and the National Assembly have been listed as respondents in the case.
The National Council of Churches of Kenya, the Kenya Conference of Catholic Bishops, the Evangelical Alliance of Kenya and the Supreme Council of Kenya Muslims have been listed as interested parties in the case.
Churches in the country received a major relief in 2022 after the High Court stopped the Kenya Revenue Authority (KRA) from demanding tax on tithes, donations and offerings without exemptions.
Justice David Majanja upheld a ruling by the Tax Appeals Tribunal that stopped the taxman from demanding taxes from Thika Road Baptist Church.
The taxman wanted the church to pay Sh5.5 million, arguing that it did not have a tax exemption certificate.
While churches are exempt from paying taxes on tithes, the KRA insisted that they must obtain the exemption, which is subject to certain conditions.
According to the judge, the KRA failed to prove that tithes, donations and offerings were gains and profits.
The church went to court when the KRA wrote to it in October 2018, accusing the religious organisation of failing to file tax returns between 2015 and 2017.
Sh5.5 million in income tax
The tax authority then demanded Sh5.5 million in income tax, which the church challenged, arguing that it is a religious organisation registered under Section 10 of the Societies Act for the promotion of the Christian faith.
The church argued that it was not a business and derived its income from tithes and offerings.
The KRA argued before the High Court that the church must have an exemption certificate if the income in the form of tithes and donations is to be exempted.
The KRA said the certificate was not granted automatically but was subject to various conditions.
Justice Majanja said in the ruling that the starting point for deciding the matter was to determine whether tithes, offerings and donations were income that should be taxed.
The court said tithes, freewill offerings and donations to churches and other religious organisations do not fall within the scope of income tax chargeable under the Income Tax Act.
