The Kenya Revenue Authority (KRA) has stepped up its efforts to wrestle tax evasion by confiscating undeclared personal effects from Kenyans returning into the country through the Jomo Kenyatta International Airport (JKIA).
Such personal effects include wigs, human hair extension, footwear, handbags, paintings and earrings which the taxman is set to auction at the JKIA’s warehouse next month if the owners fail to clear the tax due on them.
“Passengers should familiarize themselves to the allowable concession of $500 (Sh54,900), the specific exemptions, types of goods prohibited and those that are restricted,” KRA Commissioner for Customs and Border Control Lilian Nyawanda said.
KRA had in 2016 set maximum duty collected on such items at Sh50,000 to fasten the clearance of passengers at international airports as it subjected the listed them to customs taxes upon arrival and departure at the terminals.
The regulations dictate that all the taxable items attract taxes at the rate determined by the value of the money paid at a foreign country but does not rely on factors as weight, size or quality. They were introduced following complaints raised by passengers returning from Dubai and China who claimed they were being extorted through hiked rates compared to those re-entering the country from Europe or America.
Passengers travelling out of the country are now required to fill in a Temporary Importation Form-P45 to declare items being shipped abroad for repair including the accompanying tools and show the receipt during return as a declaration. Items bought bought in Kenya and being carried for commercial purposes must also be declared during departure for purposes of taxes on return.
And gadgets like video recorders, phones and projectors bought while on a trip to Kenya and currency exceeding Sh1 million ($10,000) must also be declared at the customs before departure while those arriving in the country must fill a passenger declaration form stating the amount paid for each item and the taxes.
Items meant for sale or business use, including those being brought back to Kenya after commercial use must also be declared as travelers remain under strict instructions to declare newly acquired items whether they were bought, inherited or gifted and all items bought exceeding the limits of duty-free shops.
Even donations are not exempt from taxes except in situations where a Pro 1B document which accompanies diplomatic goods or special letter from the Treasury is produced otherwise flouting of these regulations will lead to the outright seizure of the listed items by KRA.
But Kenyans who have been living in foreign countries are allowed by law to import personal items and household goods duty-free on returning home so long as they can provide proof of living abroad for at least two years.
The law also provides that those bringing in used personal effects or household items must have owned and used them for a period not exceeding one year to qualify for tax exemption.
Kenya Revenue Authority (KRA) is in pursuit of Lugari MP Ayub Savula whose publication is owing the them more than Sh473 million in unpaid taxes emanating from business deals signed with various State agencies between 2013 and 2017.
Sunday Publishers which belongs to Savula was awarded contracts by Energy ministry, National Land Commission, National Hospital Insurance Fund, Nairobi, Migori and Mombasa counties.
The controversial lawmaker has been ordered by High Court judge David Majanja to get a bank guarantee of Sh10 million, within 45 days, as a condition to bar KRA from forfeiting assets belonging to his publication. KRA wants the court to allow them seize assets belonging to the publication which they will later auction to recover the amount they are owed.
Savula moved to court to seek an injuction barring KRA from executing a judgment of the Tax Appeals Tribunal which gave the taxman go ahead to seize his assets and recover the money. The court heard that the Lugari Mp had only paid Sh3 million and was promising to pay another Sh3 million.
Lugari MP Ayub Savula (far right) when he appeared in court with his co-accused [p/courtesy]
“I find that the security of Sh3 million being proposed by the appellant (Savula) insufficient and too low considering the tax liability at stake. Security of Sh10 million in the form of a bank guarantee from a reputable bank would be most appropriate taking into account the circumstances of the case,” Justice Majanja ruled.
Mr Savula who claimed that his publication does not have any liquidity to furnish the security in one instalment also pleaded with the court for leniency arguing that some of his documents had been confiscated by various investigative agencies. The publication which is embroiled in many legal battles was forced to halt its operations after it became too expensive to run.
The lawmaker has been courting controversies since 2018 when he implicated in a Sh2.5 billion scandal with 18 other accomplices at the Government Advertising Agency (GAA) where they were charged and released on bail.
Some of the 18 accused persons included his two wives (Gatwiri Ringera & Hellen Kemboi) and the former Broadcasting and Telecommunication PS Sammy Itemere. Savula and the gang stole Sh122,335, 500 at GAA using dubious companies.
A Jubilee Party campaign financier is the latest billionaire to be pursued by the Kenya Revenue Authority (KRA) over Sh2.5 billion unpaid taxes from big ticket State tenders in agencies like the Kenya Medical Supplies Authority (Kemsa) and the military.
Mary Iambi Mungai, a member of the Friends of Jubilee Foundation lobby which raised millions of shillings for President Uhuru Kenyatta’s re-election campaign in 2017 in two hours, was last month summoned along with her two daughters to shed light on the alleged unpaid taxes.
Ms Mungai’s daughters Everlyn Nyambura and Purity Njoki Monday obtained a court order stopping their arrest for allegedly failing to honour the summons by the KRA.
The court was told that their billionaire mother was away in Zambia for undisclosed business deals.
The taxman is pursuing Ms Mungai over alleged unpaid taxes for the billions of shillings earned from government tenders for supplying boots, uniforms and cereals to the military, among other State departments.
The Treasury has announced a new crackdown on wealthy tax evaders as part of its commitment to the country’s creditors, setting the stage for travel bans, asset freeze and deactivation of Personal Identification Numbers (PINs).
The clampdown is revealed in a commitment that Kenya made to the International Monetary Fund (IMF) to recover unpaid taxes from high-net worth professionals and traders in efforts to raise the national revenues.
The taxman says Ms Mungai and her two daughters earned billions of shillings between 2014 and 2019 through their company Purma Holdings Ltd.
The KRA says it has been conducting investigations on tax obligations by the company for the past two years.
The court heard that they have been cooperating and have provided all documents and information demanded by the KRA.
“The commissioner has reason to believe that you, Mary Wambui Mungai, are culpable, connected to or have information that will assist us in our investigations into the identified offences,” says the letter sent to the businesswoman on June 23.
The KRA says the directors of the company were summoned on June 25 but failed to appear. Instead their lawyer appeared before the KRA and sought for an extension of the summons to June 28. Come the appointed day, says the KRA, the lawyer said the clients would not be attending because Ms Mungai was out of the country.
Fearing their arrest, her two daughters rushed to court seeking an anticipatory bail.
They told Justice Cecilia Githua that their mother was in Zambia on business assignments.
They also claimed that they resigned from the company on August 28, 2019 and transferred their shares to their mother.
The two daughters said they held 150 ordinary shares each and were incorporated as directors of Purma Holdings when they were minors.
“That the 3rd Applicant [Nyambura] and I ceased being directors of Purma Holdings when on realising that the two of us had other interest for our respective careers in life, our mother removed us,” Ms Njoki said in court documents.
Yesterday, Justice Githua directed the duo to sign a personal bond of Sh500,000 each and present themselves to the KRA on or before July 19 for questioning. The case will be mentioned on July 21 to confirm whether they complied with the directive.
“The applicants are apprehensive that the respondents are determined to have all of them in custody by all means possible and will abuse their powers in disregard of the Constitution to meet their objectives,” their lawyer, Walubengo Waningilo, said in the petition.
Ms Mungai has also been listed among persons who supplied Kemsa KN95 face masks and surgical face masks for a tender worth Sh30.5 million.
She also supplied personal protective equipment (PPE) kits worth Sh90 million. Both awards were made through direct procurement in June last year.
Kemsa has been fighting allegations of purchasing low quality items and inflating prices of others in the procurement of Covid-19 emergency equipment.
Embattled Kenyan betting giant SportPesa has “disputed” the astonishing Sh95 billion (£633 million) total that the Kenya Revenue Authority says it owes in unpaid taxes.
The figure, reported by the Daily Nation newspaper in January, is thought to be one of the biggest amounts ever claimed from a company by the Kenyan tax collector.
The Daily Nation article was based on a leaked letter from the KRA to SportPesa’s main entity in Kenya, Pevans East Africa, in which it detailed its findings from a preliminary audit of the company’s tax affairs from 2015 to 2019.
SportPesa – through London law firm Schillings – told Finance Uncovered this month the headline Sh95 billion figure was “not a formal finding by KRA or even a formal assessment”.
It added that the KRA had “simply [undertaken] an information-gathering exercise” that is still “in its preliminary stages”.
Schillings said its client “disputed” the figure and because the letter was not a formal assessment there was “no question” of it taking it yet to a Tax Appeals Tribunal. Schillings declined to answer detailed questions about the matter, insisting the letter was confidential.
The KRA, likewise, declined to answer detailed questions.
Has the KRA made a huge error?
However, an analysis of the KRA’s reported findings by Finance Uncovered suggests the tax authority may have made a massive error in its calculations, overestimating its total by at least Sh69 billion (£460 million).
Stripping this error out would leave a preliminary assessment of Sh26 billion (£169 million).
The Finance Uncovered analysis of the KRA’s calculation is based on two main sets of documents.
The first is the original articlepublished by the Daily Nation in January which provided many details of the KRA’s private letter to Pevans.
This letter reportedly contained breakdowns of how the KRA arrived at the Sh95 billion figure, for example, by examining various company accounts and other documents it had obtained during its audit.
The second set of documents was a series of annual company accounts for Pevans between 2014 and 2019. Unlike in the UK, these corporate documents are not usually available for public viewing in Kenya.
By comparing the numbers reportedly used by the KRA in its audit to the actual figures in Pevans’s books – and by examining other important information in the publicly available accounts for SportPesa’s UK operations – it was possible to see a fundamental flaw in the KRA’s assumptions.
This related to the “revenue share” arrangement that SportPesa had set up between its UK and Kenyan businesses. This arrangement had allowed the UK company to bill Pevans for a percentage share of its revenue from Kenyan gamblers.
It was a legal method of sending money from Kenya to the UK.
However, Finance Uncovered has concluded the KRA’s officials applied the revenue share percentage to the wrong revenue figure, thereby massively overestimating the company’s actual turnover.
This had two major consequences for the KRA’s tax calculations because they then not only overestimated the amount of corporation tax that the company owed, but also the total of allegedly unpaid betting tax, a separate levy applied on turnover.
The mistake could be hugely embarrassing for the KRA. It is not known whether it has accepted the error as part of the ensuing private correspondence with Pevans.
Boom and burst: the SportPesa dividends
Meanwhile, a separate examination of the accounts for Pevans East Africa has also revealed the enormous sums the company was able to pay out in dividends and move offshore as it cashed in on Kenya’s betting boom.
They show how the company’s Bulgarian and Kenyan owners bolstered their wealth during a period when many of those using gambling sites became gambling addicts and lost their livelihoods.
Between 2014 and 2019, Pevans paid out Sh7.8 billion (£60 million) in dividends to its select group of 10 shareholders, according to the company’s cash flow statements.
A cousin of Kenya’s president became the 11th shareholder, with a 1% stake, in mid-2018.
In addition, Pevans paid its seven directors – of whom five were non-executives earning much lower fees – a total of Sh558 million (£4.3 million) in salaries and perks between them in that time.
The accounts also reveal that as SportPesa flourished, it created a network of related overseas companies which received money from Pevans for “revenue share” arrangements, “legal and professional fees” and other services.
These monies were used to facilitate the company’s international expansion that saw it land high profile sponsorship deals with the likes of English Premier League club Everton FC.
The overseas companies which received the money from Kenya included firms based in the UK, the Isle of Man tax haven and the Canary Islands.
These offshore structures and payments are not illegal and there is no suggestion of wrongdoing by SportPesa.
The KRA was reportedly examining many of these payments as part of the wide-ranging audit it had conducted on Pevans’s books.
The tax row is the latest low point for SportPesa’s owners after their bubble burst spectacularly in 2019 when the company fell out of favour with the government.
Until then the company had been a darling of the Kenyan corporate world. The accounts seen by Finance Uncovered help paint a fuller picture of its rise and fall.
SportPesa was founded in 2014 by a consortium of Bulgarian and Kenyan investors.
The three biggest shareholders, with a 21% stake each, were Guerassim Nikolov, a former croupier from Sofia who had made Kenya his home in the early 2000s; Gene Grand, a Bulgarian-born, naturalised American citizen; and Dick Wathika, a Kenyan politician who had been an MP and former mayor of Nairobi.
Guerassim Nikolov, SportPesa’s co-founder and equal biggest shareholder (Photo: Facebook)
Wathika died in 2015, and his shares passed to his widow, Asenath Wacera, a private figure who keeps a low profile.
Other significant shareholders include one-time chairman Paul Wanderi Ndung’u, a well-connected businessman with links to the ruling party’s fundraising machine, holding a 17% stake; and its chief executive Ronald Karauri, the son of a former MP who began his career as a pilot for the national carrier Kenya Airways, with 6% initially, rising to 7% in 2018.
Sports betting was a relatively new idea in Kenya at the time, but the Pevans accounts for 2014 showed early promise for the sector: the company received bets totalling Sh1.27 billion (£9 million) that year.
What happened over the next four years was simply extraordinary.
Punters flocked to SportPesa, whose slick product meshed seamlessly with a nationwide mobile phone-based banking system, dominated by a service called M-Pesa, which had become an essential part of everyday life in the East African country.
The bets poured in: from Sh16 billion (£104 million) in 2015 to Sh80 billion in 2016; then Sh111.5 billion in 2017 rising to Sh149 billion (£1.15 billion) in 2018, the accounts show. This was an increase of more than ninefold in just three years.
SportPesa’s Gross Gaming Revenue (GGR), or turnover – the amount it retains after player winnings have been paid out – also followed a steep trajectory, and stood at Sh20 billion (£155 million) by 2018, up from Sh3.49 billion (£23 million) in 2015.
As a gambling craze swept the nation, a wave of social problems rose steadily in its wake. The government tried introducing new taxes to put the brakes on betting.
But eventually it could no longer ignore reports of gambling-related suicides, data showing hundreds of thousands of young Kenyans had been blacklisted for bad debts, and public pleas by influential sections of civil society, such as churches, to bring betting under control.
In July 2019, the government intervened, withdrawing betting licences of 27 companies, including SportPesa. It also ordered telecom companies to stop processing bets on their behalf.
Out of Kenya, into Europe…
But by this time billions of shillings bet by ordinary Kenyans in net stakes had been transferred by SportPesa to its companies overseas as it embarked on a major international expansion.
The accounts for Pevans show the scale of this offshoring: more than one-fifth of its turnover earned in Kenya was transferred out of the country directly.
To help fund sponsorship deals with the likes of Everton and smaller deals with Arsenal, Southampton and Hull City, the company’s bosses established a new corporate structure.
In particular, they established related companies in the Isle of Man and the UK.
And these companies were funded almost entirely by two newly devised revenue streams: a “revenue share” agreement with Pevans, based on a small percentage of the gross bets staked in Kenya; and by billing Pevans for “legal and professional fees”, or shared services.
These were recorded by Pevans in its accounts as costs, which in turn reduced its profits and its liability for Kenyan corporation tax.
These offshore structures and related party payments are not illegal and there is no suggestion of wrongdoing by SportPesa.
Based on the accounts it has seen, Finance Uncovered has calculated that in 2017 and 2018, the total of these costs paid to the overseas companies was Shs10.7 billion (£82.4 million).
Of these, Shs5.46 billion (£42 million) went to the UK company, SPS Sportsoft Ltd, and Shs5.24 billion (£40.5 million) to SP Services Ltd in the Isle of Man.
As a result of this arrangement, the UK company recorded huge profits, but SportPesa’s bosses were able to reduce their tax bills there, too.
As Finance Uncovered reported in 2020, the UK company was able to exploit a 1976 Double Taxation Treaty between Britain and Kenya. This allowed it to offset the Withholding Tax it paid in Kenya on the international payments against the UK corporation tax liability.
This meant it recorded huge post-tax profits in Britain. These were then paid out as dividends to a UK holding company called SportPesa Global Holdings Limited – owned by the same shareholders and in the same proportions as Pevans.
As of the 2018 year-end, the holding company itself was still sitting on £21.8 million of accumulated profit reserves.
A £14 million impairment charge on its investment in SportPesa Italy reduced this reserve to £7 million at the end of 2019, according to the holding company’s latest accounts, released earlier this month.
The Isle of Man company’s profits are unknown, because company accounts are not publicly available in the offshore jurisdiction. However, it would have paid 0% corporation tax on its profits.
Enter the KRA….
Whatever expansion plans SportPesa had in 2019, they hit the buffers as soon as the Kenyan government brought operations at its cash cow, Pevans, to a halt.
In January, the Daily Nation reported many details of the KRA’s preliminary findings of its tax audit of Pevans.
This revealed that the KRA had questioned the huge legal and professional fees incurred by Pevans in its dealings with its overseas companies.
The KRA reportedly also said that certain sports sponsorship costs were not allowed under Kenyan law and it reportedly added these back into Pevans’ taxable profits.
The future for SportPesa is now unclear and there have even been major battles between its original shareholders.
The public fall-out was triggered in October last year after SportPesa transferred its branding rights from Pevans to a company with a newly acquired Kenyan betting licence, called Milestone Games.
Finance Uncovered posed a series of questions to SportPesa back in January about the KRA audit as well as about its 2014-2019 financials. SportPesa responded by instructing London law firm Schillings. Schillings said it acted for both Pevans and Milestone.
In letters exchanged with Schillings over the ensuing months, the law firm said the matter with the KRA was strictly confidential and not subject to public scrutiny. It said its client would not be commenting on any issues relating to the KRA.
It said Pevans was cooperating “fully” with the KRA.
Schillings also said the value of dividends and salaries received by individual shareholders and directors was also “private and confidential”. The lawyers said our calculations on dividends – taken from Pevans’ own cash flow statements – were “incorrect” but declined to expand.
SportPesa has strongly denied any wrongdoing.
The KRA declined to comment.
This Article Was First Published On Financial Uncovered.
Brookhouse school has moved to the Court of Appeal over its long-running Sh140 million tax feud with the Kenya Revenue Authority (KRA).
The up-market school and the KRA row emanated from the subsidized tuition fees Brookhouse granted to its staff but the High Court Judge David Majanja ruled in April that that benefit must be taxed.
The school went back to court and convinced Justice Majanja to suspend his decision, pending an appeal.
The judge allowed the plea to suspend his earlier decision but also directed the school to furnish a bank guarantee of Sh15 million within 45 days, failure to which the taxman was free to go for the money.
“Turning to the issue whether the respondent will suffer substantial loss should the court deny it stay, I hold that the sum of KES 140,217,163.00 adjudged due to the Appellant is not insubstantial. If execution proceeds, the respondent’s business which comprises offering educational services to local and international students, is likely to shut down,” the judge ruled.
Justice Majanja also clarified that it was not disputed that the school was a going concern like many businesses which are struggling to grapple with the Covid-19 pandemic but any execution would affect its reputation as an international school.
Justice Majanja had in April allowed the KRA to collect the money arguing that any benefit granted to the employees by the school is taxable.
“I find the Commissioner’s position reasonable since staff members would pay the normal and ordinary school fees, which constitute the market rate, but for the employment-related benefit,” Justice Majanja said.
James Mburu, KRA’s commissioner general [p/courtesy]But the court dismissed an argument by Brookhouse that the law was ambiguous on the value to be attached to non-cash benefits granted to it’s employees.
And according to KRA’s audit of the school’s account between 2010 and 2014, it is claiming taxes amounting to Sh186.6 million including the Paye, corporate tax, and withholding tax.
But the management of Brookhouse International School refuted the computation, and taxes levied non-cash benefits and Paye granted to its staff.
The elite school argued that in the absence of clear law on taxation of school fees benefits, it charges its teachers 15% of the applicable school fees following best practice.
The school also argued that even if all benefits were taxable, KRA should not be subject it to the full 85% of the benefits but 10%.
But the their objection was reviewed and still ended up maintaining the Sh140 million for Paye and Sh43 million withholding tax.
The Italian firm in the middle of Arror And Kimwarer dams scandal where over Sh63 billion was looted risks its machinery and equipment at the Mombasa port being auctioned by the Kenya Revenue Authority (KRA).
A notice issued by KRA on Friday shows that CMC Di Ravenna among other dubious firms risks losing their imported goods which are still held at the customs warehouse if not collected by May 2021.
The equipment being held at the Kilindini harbor includes muck cars used for tunneling and dump stations which are used for disposal of raw sewage.
“Pursuant to the provisions of section 42 of the East African Community Customs Management Act 2004, notice is given that unless the under-mentioned goods are entered and removed from the Customs Woodlouse, ICDE within 30 days from the date of this notice, they will be sold by public auction on May 18,” KRA said.
CMC Di Ravenna managers in an old courtesy photo.
CMC Di Ravenna imported the machinery in 2018 for construction projects but it failed to clear the equipment due to financial woes hence pushing the taxman to issue threats of auction.
The move to auction the equipment comes barely a week after CMC Di Ravenna lost the first round of attempts to stop Absa Kenya from selling 98 cars over a Sh585 million bank loan.
KRA has not disclosed the amount it is seeking to recover through the sale of the equipment as pressure keeps mounts on the controversial firm that is also fighting to stop Absa bank from auctioning its cars over defaulted loans.
CMC Di Ravenna suffered a blow suffered a setback after the court upheld a consent agreed between the firm and Absa to freeze the transfer of the cars pending the determination of a case in which the bank is seeking to recover over Sh585 million loan given to the firm in 2017.
The firm approached the lender for various financial facilities ranging from asset financing, working capital, short-term loan/overdrafts and bank guarantees.
In a ruling made last year, court allowed KRA to seize over 100 cars belonging to CMC Di Ravenna over tax evasion claims. The controversial firm came into the limelight over its role in the failed construction of the multi-billion Arror and Kimwarer dams in Elgeyo Marakwet County.
Kenya Revenue Authority (KRA) and City Hall have launched a joint crackdown targeting home and office blocks belonging to landlords who have defaulted on paying land rates with some defaulters already served with warning letters should they fail to offset their rates.
“You are supposed to have paid up all the rate fees for the plot, including any arrears owed to the Nairobi County Government. The County Government Finance Act of 2015 mandates the authority [KRA] to repossess any land property the owner defaults rate payment and reallocate it to the deserving,” a notice pinned on one of the properties read.
Revenue Act of 2015 was amended in 2018 in a move that gave more powers to the County government of Nairobi to recover land rates from rental income to get the Sh15 billion that was owed to them then.
The amendment of the of the Act was a also aimed at easing access to property whose owners had defaulted on land-rate payment by allowing City Hall to temporarily repossess such homes and offices to recover the debt owed from monthly rents.
KRA Commissioner James Mburu [p/courtesy]Analysis by the national government discovered that 90% of land and property owners in Nairobi had defaulted on paying their rates after the county government failed to lower the number of defaulters through closure of office blocks and waiving penalties for defaulters.
City Hall in February 2020 opted to rope in KRA to help them improve revenue collection from such properties where the taxman will now inspect all revenue streams and manage the taxes through the normal process of assessment, payment, accounting, remission and enforcement through both compliance and debt recovery.
KRA announced that taxpayers would benefit from a partial relief on penalties and interest on the undisclosed taxes, in a programme initiated on January 1 and runs to December 31, 2023.
The programme dubbed Voluntary Tax Disclosure Programme (VTDP) was introduced through the Finance Act, 2020 and it aims to grant relief on penalties and interest on any tax liability disclosed in respect to the period between July 1, 2015 and June 30, 2020.
Nairobi County raked in Sh1.3 billion from fire inspection certificate, housing rent, and land rates but it recorded only Sh3.9 billion in own-source revenue in the six months under focus against a target of Sh6.4 billion.
A new proposed law to tame gambling will allow The Kenya Revenue Authority (KRA) and state agencies like Police and National Intelligence Service (NIS) to track betting activities on real time.
The amendments that have received the backing of the state will create a platform that will enable more agencies to trail and apprehend gamblers behind suspicious bets to combat money laundering and flow of dirty money.
The government is forcing the changes amid piling concerns that betting firms are offering services where proceeds of crime and corruption are rinsed without any declarations to the KRA and the Betting Control and Licensing Board (BCLB).
The amendments that are already in parliaments are improvements to earlier changes that only gave the Communications Authority of Kenya (CA) real-time access to gambling activities.
If adopted the new laws will allow security agencies and the Financial Reporting Centre (FRC) which tracks illicit money to be added to the list of institutions that will track the bets whenever they are placed.
“The Board (Gaming board) shall establish a framework to facilitate real time monitoring of online gaming activities which shall be accessible for monitoring by the Communications Authority of Kenya, the board and any other relevant government agencies,” the Bill read.
The law is targeting plungers who deal in large transactions but bet with a small fractions. Those making small, regular and suspicious bets will also be on the radar of the government.
Kenya is known for inflows of dirty money, majorly proceeds of crime, corruption, drugs and shady business deals by tender bandits in government who end up investing in luxurious cars and real estate.
In 2019, state revoked licences belonging to more than 15 betting firms over fresh demands for more taxes and shareholder disclosures which resulted to court fights with giant gambling firms like SportPesa and Betin.
The gambling industry has achieve a combined revenue of Sh204 billion as it becomes the best ground for criminals to ‘rinse’ dirty money.
Criminals collude with gambling executives to feed their illicit money into their betting wallets, bet a small share then cash out the remaining bulk.
The new rules will also force gambling firms to get advertising approval from the regulator. The advert will also have a warning message that must constitute a third of the actual advertisement.
The State has recently lost its bid to freeze betting accounts and seize cash that remains unused for three months in a row amid money laundering concerns.
But the parliament’s committee on Sports, Culture and Tourism rejected the proposal because confiscation of idle cash is the role of the Unclaimed Financial Assets Authority (Ufaa).
In what looked like a move influenced by the deep pocketed gambling cartels, the parliament was also swayed to reject changes to the Betting Bill that aimed to empower CS Fred Matiang’i.
Parliament rejected the move that would see the Interior CS freeze the accounts and order gamblers to show proof and declare source of cash before accessing the money.
While local firms and companies are closing down because of a tax burden under Jubilee administration, Solel Boneh International (SBI) Holdings, a road construction company and a subsidiary of Shikun & Binui based in Israel have been cleared of bribing Kenyan officials in September 2018 to get the tender to construct Mau Summit-Kericho-Kisumu Highway.
The taxman has SBI on their radar after a former employee, Shay Skief, exposed the hood that kept the secrets of the multinational firm that has evaded close to Ksh1 billion in taxes.
A report authored by Partnership for African Social& Governance Research dubbed Illicit Financial Flows in Kenya: Mapping of The Literature and Synthesis of the Evidence,a Non Governmental Organisation, it was revealed that SBI, in a case that was first mentioned on December 5, 2012, sought interim orders prohibiting its former finance manager from disclosing its trade secrets and other confidential information that would have exposed it to scrutiny and charged for defrauding the Kenya Revenue Authority.
In the case, it emerged that the SBI had not been deducting or remitting the compulsory income tax from the Finance Manger’s pay perks. The Court was also told that his pay perks were cleverly divided into two to avoid KRA’s suspicion.
According to documents presented in court, SBI paid the former finance manager a net monthly salary of Ksh994,117 and a gross monthly local salary of Ksh383,000. The court was also informed that “were it not for the contractual fall out between the firm and former finance manager, it would have been difficult to detect SBI’s tax evasion schemes.”
This comes days after the same SBI has been cleared by Israeli Authorities on their bribery case. SBI had been accused of bribing 20 senior government officials including a former roads minister to win the Ksh14 billion Mau Summit- Kericho- Kisumu tender in 2010.
“According to the evidence collected, in Kenya alone where the investigation focused … bribes totaling tens of millions of shekels were transferred, generating projects and benefits worth hundreds of millions of shekels,” Police and the Israel Securities Authority (ISA) were quoted Reuters saying at the time.
Previously, the company has been probed by the World Bank Integrity department over projects in Guatemala, although a report has not been issued since 2016, according to Shikun & Binui.
In February last year, the World Bank opened investigations into the tender, including visits to the Kenyan offices.
“The audit procedure has begun, including the collection of evidence by the World Bank, inter alia, by way of a number of visits to the branch in Kenya to review materials and request additional materials,” Shikun & Binui said in its annual report.
Competition Authority Of Kenya has rubbished off KRA orders prohibiting local distillers to sell alcoholic spirits in 250-millilitre containers below Sh150.
According to KRA, the retailers selling spirits at or below Sh150 are tax cheats and illicit brewers who flood the market with deadly drinks. KRA stated that production expenses and duty cost don’t permit alcohol to be sold at that price. A statement that has forced CAK to seek constitutional clarity over the KRA order, pointing out that KRA could have breached sections of the antitrust law.
“We are aware of it (price-setting order) and we have written to KRA to set up a meeting so as to appreciate where they are coming from,” CAK Director-General Wangómbe Kariuki told the Business Daily in an interview.
KRA orders also warned distillers who sell products below Sh150 that their products would be impounded or/and withdraw their operating licenses. This whacks a large generation of consumers of upsurging cheaper spirits like Moonwalker, Jambo Extra, Dallas, meakins just to name but a few…
“Based on our review, products in the market with a selling price below Sh150 per bottle of 250ml at 40 per cent v/v are considered non-compliant in tax based on the minimum cost structure. We request companies to adjust the prices in the current and subsequent tax returns to reflect the correct price benchmark for the alcoholic beverage sector for tax purposes.” KRA says in a letter addressed to distillers.
In the letter, KRA issued a seven-day notice for compliance with the minimum price order.
“KRA intends to commence mop-up of all products sold below the benchmark prices and sanctions imposed on the affected excise manufactures. The mop-up will start after seven days from the date of this letter,” added KRA in reference to the order sent in late October.
Kenya has the highest rates of tax on alcohol as compared to other African States. Here, Spirits are taxed at Sh221.24 per litre or Sh55.31 for the 250-millilitre product.
Tusker lager has a recommended retail price of Sh180 per bottle and Sh55.31 goes to the taxman directly as excise duty. Tax on beer has increased from Sh32.50 per bottle in 2014.
Beer and Spirit heads in Kenya have been thrown once again under the bus. High taxes have pushed almost bankrupt Kenyans to cheap alcohol majority who are illicit drinks.
KRA Commissioner for Domestic Taxes Elizabeth Meyo said the move to set the minimum price would boost tax revenues and help the taxman to clamp down tax cheats.
“As part of compliance monitoring, KRA monitors the prices in the market and any persons putting products in the market that fall below the minimum cost structure are normally targeted for compliance checks. We derive the minimum cost structure from the analysis of the cost of inputs required for the production of a unit of alcohol,” said Ms Meyo.
However, the competition watchdog, CAK, has protested KRA’s orders setting a binding minimum price of Sh150 and the threat to impound products selling below the price.
“Restrictive trade practice which directly or indirectly fixes purchase or selling prices or any other trading conditions in Kenya, or a part of Kenya, are prohibited, unless they are exempt in accordance with the provisions of Section D of this Part,” reads Section 21(1((a) of the law. Part D allows manufacturers to recommend non-binding retail prices.
CAK in 2016 fined British multinational SABMiller Sh2.4 million for engaging in restrictive trade practices by setting minimum prices for its products.
In 2016, Crown Beverages, British SABMiller owned company that sells Redds, Castle, Nile Special, Keringet mineral water, Peroni and Miller was fined Sh2.4 million by CAK for setting the minimum prices for its products.
While KRA focuses more on imposing taxes on Kenyan products, Kenyans who have nothing in their pockets will still go for as cheap as Ksh20 illicit drinks from Uganda and Tanzania flooded on porous Kenyan markets. We are a country that is under the leadership that is focused on taxing more than creating a conduce business environment more fillings of tax returns.
All cleared Betting firms have started deducting 20 percent withholding tax from gamblers winnings as they comply with directives from the Government.
The move is despite an April court order that bars the betting firms from deducting and remitting the money to KRA until a case by one of their customers challenging the taxation of winnings is heard and determined.
The taxes were introduced last year by the Finance Act 2018 but have faced litigation and delaying implementation.
For instance, BetLion, one of the firms that have complied with the directive by the Betting Control and Licensing Board and the Kenya Revenue Authority (KRA), has notified customers that it would be deducting 20 percent from their winnings and remitting it to the taxman.
“This means that customers will now get 80 percent of the potential winnings going forward. As a business, we hope that customers continue to engage in responsible gaming,” said the BetLion.
The revised taxation laws are a pragmatic response to a growing and vibrant industry.
The Government and the industry have been in a push and pull about taxing prize money for some time now, with the former appearing to have won last year with the passing of the Finance Act 2018, which slapped winners with the withholding tax.
KRA has since notified gamblers that it expects betting firms to deduct and remit the taxes. “Betting companies, are required to withhold winnings at a rate of 20 percent.
What this means is that if you place a bet, for instance of a win of Sh50,000 you will only receive Sh40,000. according to the taxman, the balance of Sh10,000 is withheld by the betting company and then later remitted to KRA.
Even though the Kenyan government is committed to collect as much revenue as possible, the percentage the government has imposed on these betting companies will only mean the gamblers, who majority are poor rather unemployed youths will be carrying the burden of massive loss on their bets.
In my opinion, we can’t have a serious government taxing the gamblers, we all, if not a few, know that all of these companies are involved in a soft fraud and match-fixing to boost their profits. We ought to have a government that should be discouraging the youths from betting and gambling, not an administration that wants to overtax the already overtaxed gambling generation and nation.
By Nicholas Olambo
The entire month of October has been declared a taxpayers’ month to appreciate every hustler paying the taxman his dues. As KRA (Kenya Revenue Authority) runs this month long futile PR exercise, its rogue officials, cartels and rogue port officials are in bed.
Just yesterday KRA officers impounded two Range Rovers disguised as clothes. As usual, the two high-end cars and six hundred bicycles in a 40ft container were from the UK and destined to Uganda. As usual, they were not declared in an attempt to evade tax. This dirty business is booming under the watch of KRA and may not stop any soon because KRA’s senior officials and government officials are the major beneficiaries.
It’s no longer news that there is a string of cartels that collude with KPA (Kenya Ports Authority) and KRA officials to import big cars into the country fraudulently as goods on transit and evading tax and duty payments in the process. Not long ago, KRA recalled over 120 vehicles which were illegally imported by cartels in Uganda and Britain.
These vehicles that were declared as transit goods to Uganda but ended up in the local market have outstanding tax issues. It’s not a new trend; KRA has been sleeping on the job failing to hit its tax collection target because of its rogue officials who foster these crimes are never seriously brought to book.
George opanga is a KRA official known to be colluding with the cartels, operating alongside businessman Elijah Girimani, these two have been behind a conspiracy to evade tax by procuring uncustomed goods and George fraudulently messing up with KRA’s Simba online system. They are being put in and out of custody, delaying justice because they have ‘stolen’ enough to hire canning lawyers.
The courts are also big obstacles to bringing these criminals to face justice through serious punishment. KRA is on record pleading with the courts to deny the accused bails as they are flighted risks and their associates are being tracked by investigators.
They are the brains behind the importation of stolen luxurious cars, registration without payment of requisite tax like they did in July in respect to a Range Rover at JKIA customs warehouse. The dirty deal saw the taxman lose over six million shillings.
Girimani who denies all the charges brought against him is one unscrupulous businessman who procured uncustomed goods having knowledge that import duty amounting to over Shs 4.5 million had not been deposited at National Transport and Safety Authority offices in Upper Hill.
Officials that cause the taxman these millions of losses are simply arraigned in court then given small bails, literally some mean cash that they pay and walk free. KRA staffers, Benard Ong’ayo, Nicholas Ambala and Fredrick Mwendia have been charged with conspiracy to evade payment of duty.
The racket that was launched in February is lenient, failing to net the cartels. They continue to operate as anonymous because some of them or their clients are high and mighty in the government. Water CS Eugene Wamalwa is a known beneficiary/ victim of the complicated KRA tax evasion syndicate.
His Range Rover that was that was deregistered was among the over 120 vehicles that were recalled by the tax agency. A whole cabinet minister who should be leading by example had his luxurious car, Range Rover V8 model (made in 2015) operating with a fake plate belonging to an Isuzu truck.
Vehicles stolen in the United Kingdom find their way into the Kenyan market through these dirty deals, Eugene’s Range was imported as house hold goods, in fact, cushions and couches. Nothing has been done to him. The lame excuse is blamed on faceless cartels as KRA hides in the desperate statement that some buyers are innocent customers. They simply lack guts to go for the big fish.
Tax evasion is a serious crime but the taxman only works round the clock to fleece the straining Kenyan any penny in his pocket. Now they are targeting to tax the shs 200 you send to your mother or your girlfriend via M-pesa and leaving the war on cartels unfinished. They claim to be interested in playbills/ till numbers.
M-pesa is registered, and the records are there to show all the transactions, KRA should go for the banks like Equity staff stationed in Namanga and other suspected banks like Cooperative Bank of Kenya, Commercial Bank of Africa and National Bank of Kenya that collude with cartels. Clearing and Forwarding firms and people in business like Anthony Maingi of Helix Company and Nelson Mugo Mwanzia of Excess Luggage Ltd for fraudulently conspiring or evading tax and duty payments.
