Court case KMA vs KRA on ETIMS for medical service
The Kenya Medical Association, in a landmark court case on behalf of all doctors, took the Kenya Revenue Authority (KRA) to court in March 2024 to ask that KRA exempt doctors invoices from the ETIMS system that had been imposed by the Finance Bill 2023.
Invoice is not Revenue
KMA was very clear that an invoice issued for a medical service is not equivalent to revenue. This is the direct and dangerous implication of use of the ETIMS system in medical practice. Recognizing a doctor’s invoice as revenue is making doctors pay for monies they may never receive. 40% of medical fees are either paid very late (could be many many years), or never paid at all. The case thus that KMA lodged against ETIMS use for doctors demonstrated clearly that the WITHOLDING TAX CERTIFICATE that is issued when a doctor is paid and copied to KRA is indeed sufficient to track what needs to be accounted for tax purposes.
Data Protection concerns
In the law suit KMA clearly also brought out the issues that go against the Data Protection Act and avered that patient data is not supposed to be share with the tax collector as the patient has not contract with the patient. To date many ETIMS receipts have a lot of unnecessary patient data going against the Data Protection Act. KRA noting this even went ahead to suggest that the law that entrenched ETIMS should be tweeked even further to allow breaches in the Data Protection Act through its submissions of the now withdrawn Finance Bill 2024.
Administrative costs
Moreover KMA pointed out that the use of ETIMS would add to the administrative costs of trying to account using ETIMS. Health facilities and doctors were forced to add additional gadgets and employ more staff just to meet these tax requirements. The cost of business went up. Of course this is transferred to an already over-taxed populace.
No stay order – harassment continued
Unfortunately, the Judge in April 2024, did not give a stay order to ask KRA to stop demanding ETIMS receipts from doctors until the case is determined, as was requested in the law suit. As a result of that the judge allowed KRA to continue harassing doctors and health facilities for ETIMS receipts for services that are basically on credit and may never be paid for. The judge allowed hospitals and insurance companies to continue showing that they have allowable expenditures even before payments to doctors was done. The judge thus unleashed KRA officers to demand tax from doctors invoices, whether or not the doctors have been paid. The court, by not issuing as stay order, literally said that for every ETIMS entry the doctor makes, they liable to tax whether or not you have been paid or will ever been paid. Because of the lack of a stay order many doctors now do not issue ETIMS receipts UNTIL PAYMENT IS DONE. KRA have thus managed to turn medical care into a CASH business. Unfortunately many Kenyans may not afford healthcare on a cash basis. In effect KRA have reduced access to care. For those who have been forced by circumstance to see clients who are covered under insurances, we have adviced them not to issue ETIMS receipts until payment has been made. Unfortunately not every doctor or hospital has the luxury of not issuing ETIMS receipts due to non payment. This is because KRA, using their monopoly of violence, via various letters have literally ordered insurance companies and health facilities to ETIMM every service whether paid or not, a very unfortunate scenario. These ones are in big trouble because they will have to pay tax on money that they have not seen.
Ruling on Notice
To date the Judge has never given a ruling on the ETIMS in medical care EIGHT whole months after the case was filed. The Judge said that the ruling would be given on notice. Ruling on notice is a very dangerous thing. Recently the Kenya Association of Private Hospitals (KAPH) had their members in Mombasa being harassed by The County Government of Mombasa who claimed that a case on Single Business Permit had been given on notice, yet the lawyer of KAPH nor KAPH itself had been served. Moreover it was claimed that the judgement had been made one month prior to their members knowing hence they were time barred for appeal. Nevertheless the case will be appealed. That said we have been waiting for the judgement on ETIMS on notice to no avail.
Revenue recognition strategy
While the ruling has not been delivered, which I think will exempt medical services from ETIMS KRA is waiting for December 31st 2024 each practitioner and health facility with thus have to determine their own revenue recognition strategy or let auditors advise on this matter. If you await KRA to decide for you depending on your invoicing system you will become literally the government of Kenya and a philanthropist where you will pay tax for monies you may never receive and at the same time offer a health service for the government to claim that it has achieved UHC. In short ETIMS for Doctors turns doctors into the underwriters of healthcare in this country.
Rallying call
The rallying call to all doctors is to continue to push on correct revenue recognition on monies actually received and not on transactions. I.e. An Invoice is not a Revenue in medical practice. 40% medical bills are unpaid. We cannot be taxed for unpaid invoices. We await the court registrar for the judgement.
Dr Simon Kigondu
President Kenya Medical Association
