Kenya Insights

Tag: tax evasion

  • KRA Is Now Keeping An Eye On Kenyans Displaying Lavish Lifestyle On Social Media To Nab Tax Cheats

    KRA Is Now Keeping An Eye On Kenyans Displaying Lavish Lifestyle On Social Media To Nab Tax Cheats

    The taxman is training its guns on rich Kenyans displaying lavish lifestyles on social media but paying little or no taxes.

    The Kenya Revenue Authority (KRA) Commissioner-General Githii Mburu said his officers are now spending time on social media, trolling Kenyans posting photos of luxurious cars, throwing expensive parties, living lavishly to ensure their taxes are in tandem with their image.

    In a move that is set to strike at the heart of the ‘soft life’ generation, socialites and a growing number of Kenyans who are splashing their lives on social media, the KRA says it is time for every Kenyan to pay their fair share of taxes.

    The tax cheats risk travel bans, collection of duty directly from their suppliers and bankers and prosecution in what is emerging to be the biggest crackdown yet on high-net-worth individuals.

    The KRA is racing to bring more people into the tax bracket and curb tax cheating and evasion in the quest to meet targets.

    The taxman has a team focused on smoking out tax cheats through sites such as Facebook, Instagram and Snapchat.

    “In the social media, we have some people posting some nice things. You would see some posting nice houses, cars, taking their families to nice places and so on. Here, we are not sleeping, when we see those, we see taxes,” Mr Mburu said in an interview with the Business Daily.

    The KRA chief said seeing a fuel guzzler zoom past him, he asks himself if that man or woman behind the wheels has paid taxes.

    “We have our officers looking, they have gadgets. They key in very quickly (the number plate) to check. We are working exceptionally hard,” he said.

    He said this could explain in part the reason for his success, having exceeded his tax collections target for this year by Sh27 billion.

    The clampdown on the rich is part of the 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 KRA is flagging wealthy individuals that have been hiding their sources of income while engaging in luxury spending and accumulation of property, including purchase of homes and big cars.

    Besides scouring social media sites, the Authority has been using various databases to pursue suspected tax cheats, among them bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority (KCCA), which reveal individuals who own assets such as helicopters.

    Mr Mburu says a huge chunk of Kenyans building houses are not paying taxes on claims the properties are products of bank loans.

    “We know you can build a house from loans. But that loan must be repaid from somewhere. We are following all those applying for meters”.

    The KRA is also linked to the government’s e-procurement system or the Integrated Financial Management Information System (IFMIS), making it easier to pursue suppliers earning billions of shillings from counties and State tenders without paying their share of taxes.

    “We have access to IFMIS and we want to see anyone being paid by government; is he or that business paying taxes? We are also able to work with other third parties like Kenya Power,” Mr Mburu said.

    Kenya Power meter registrations are helping the taxman to identify landlords, some of who have been slapped with huge tax demands.

    Car registration details are also being used to smoke out individuals who have little to show in terms of taxes remitted.

    The aggression has seen the taxman run ahead of its targets for the first time in over a decade. In its latest tax performance update released last week, the KRA said it collected Sh154.3 billion in October 2021 against a target of Sh142.2 billion.

    Mr Mburu said his agency started the new financial year on an upward trajectory after surpassing its July-September 2021 target of Sh461.6 billion by Sh15 billion, representing a 30 percent growth.

    Cumulatively, the KRA collected Sh631 billion between July and October 2021 against a target of Sh603.9 billion, translating to a performance rate of 104.5 percent, a growth of 28.3 percent and a surplus of Sh27 billion.

    Mr Mburu said the improved performance is anchored in implementation of key strategies, among them tax base expansion that focuses on bringing citizens and business previously not paying taxes.

    Other strategies include enhanced compliance efforts addressing tax evasion and illicit trade as well as extensive use of data and intelligence to unearth unpaid taxes.

    Mr Mburu noted that Kenya’s tax to Gross Domestic Product ratio stands at 13.8 percent, indicating the need to continue enhancing tax collection and reducing tax expenditure in the form of exemptions and incentives to achieve the desired rate of more than 20 percent.

  • UK inherits Sh2bn SportPesa company’s assets

    UK inherits Sh2bn SportPesa company’s assets

    The government of the United Kingdom is set to inherit Sh2 billion worth of assets held by SPS Sportsoft Limited, a gambling software and support services company which owns SportPesa.

    SPS Sportsoft’s top client is Kenya-based Pevans East Africa Limited which shut down it’s operations in 2019 after the Kenyan government declined to renew its operating licence over tax evasion scandals.

    “The Registrar of Companies gives notice that, unless cause is shown to the contrary, the company will be struck off the register and dissolved not less than two months from the date shown above…  Upon the company’s dissolution, all property and rights vested in, or held in trust for, the company are deemed to be bona vacantia, and will belong to the Crown.” SPS stated.

    Bona vacantia translates to vacant goods or ownerless assets. In the UK such assets  including those of dissolved firms and estates of people who die without a will or blood relatives are inherited by the government.

    SPS has note disclosed the reasons why it is being liquidated but it has suffered losses Kenya where shareholders are embroiled in wrangles. Pevans was the biggest client generating upto £20.6 million (Sh3.1 billion) in 2018 and accounting for 96% of the total revenue of £21.6 million (Sh3.2 billion).

    Other clients operating SPS include SPGHL’s subsidiaries which also trades under the Sportpesa brand in Tanzania and South Africa. The firm’s dissolution means that assets worth £13.2 million (Sh2 billion) that will be surrendered to the UK government.

    SPS’s creditors also risk losing upto £8.5 million (Sh1.2 billion) that they were owed in the review period. It was required to publish its 2019 accounts by December last year but did not meet the deadline pushing the authorities to have it liquidated without the release of its updated financial statements.

    The fall of SPS is a mojor blow to Kenyan businessmen Asnath Maina and Paul Ndung’u and Asenath Maina who fell out with their Bulgarian counterparts over control and ownership of SportPesa.

    Pevans’ operating licence was revoked in July 2019 over unpaid taxes and penalties that now stand at Sh95 billion according to the Kenya Revenue Authority (KRA). It was the second largest company by revenue with close to Sh150 billion in 2018, only coming second to Safaricom.

    But the Bulgarian investors later teamed with Ronald Karauri, Pevans’ chief executive office to form Milestone Games Limited where they transferred the SportPesa trade name. Sportpesa brand was moved from Pevans to SPGHL for £100,000 (Sh15.1 million) and then to Milestone in transactions that began on June 2, 2020.

    One Kalina Karadzhova acted for SPGHL Mr Karauri signed the deed of assignment on behalf of Pevans but it later emerged that Karauri controls close 55% stake in Milestone.

     

  • KRA set to auction personal effects at JKIA

    KRA set to auction personal effects at JKIA

    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.

  • Court Ends Fraud, Tax Evasion And Money Laundering Suit Against Bluebird Aviation Owners

    Court Ends Fraud, Tax Evasion And Money Laundering Suit Against Bluebird Aviation Owners

    The High Court has dismissed a suit filed by minority owner of Bluebird Aviation who accused his partners of siphoning more than $1 billion (Sh108 billion) from the airline through tax evasion, fraud and money laundering.

    Justice Alfred Mabeya brought to an end the five-year court battle pitting Adan Abdi Yussuf against three other owners of the 29-year-old airline.

    The judgment came after the Director of Criminal Investigations (DCI) cleared three shareholders and executives of Bluebird — Hussein Farah, Unshur Mohamed and Mohamed Abdikadir — from financial malpractices after a nine-month investigation.

    The investigation followed a criminal complaint from Mr Yussuf against his fellow shareholders, accusing them of fraudulently channelling massive funds out of the company as part of a money laundering scheme.

    Justice Mabeya dismissed Mr Yusuf’s allegations, saying he failed to prove claims of fraudulent accounting, tax evasion, fraud and money laundering.

    “In the present case, all that the plaintiff did was to make sweeping allegations without any backing by way of evidence. He only stated that he had carried out investigations and made discovery of the allegations he made,” said the judge.

    “The documents that were produced were not authenticated to prove any of the allegations made against the defendants.”

    Mr Yussuf, who claims to own 25 percent of the charter airline, argued that more $1 billion (about Sh108 billion) has been stolen and put in offshore accounts and investments in Western capitals after being transported physically out of the country without declaration. He said the three directors were using the airport passes granted for restricted areas in airports to move the billions.

    The DCI dismissed the secret movement of cash at the airports, arguing its investigation and probe by Kenya Airports Authority (KAA) found no evidence of money laundering.

    The Financial Reporting Centre through the DCI said it failed to detect breaches while tracking the flow of cash in and outside Blue Bird Aviation.

    Mr Yussuf claimed that his partners were stashing proceeds from the airline in international banks under Amazon International FZE. But Justice Mabeya said his partners had sufficiently showed that their relationship with Amazon was purely commercial.

    “That the plaintiff had failed to demonstrate the directorship or shareholding of the defendants at Amazon or that they had stolen money from the Company and deposited the same at Amazon’s accounts,” he said.

    “No faithful director exercising independent judgment would take any of the said measures, none of which are beneficial to the Company. In fact, all the steps taken by the plaintiff were contrary to the success of the Company. They were meant to sound a death knell on the company,” he added.

  • KRA goes after Savula over Sh473 in unpaid taxes

    KRA goes after Savula over Sh473 in unpaid taxes

    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.

     

     

  • Rogue Landlord Subject Kileleshwa Residents To High Insecurity On Account Of Being Forced To Pay Rent In Cash

    Rogue Landlord Subject Kileleshwa Residents To High Insecurity On Account Of Being Forced To Pay Rent In Cash

    The property, going by the name Viraj, has about 1,000 units in Kileleshwa and another 1,500 units on Mombasa road. For the Kileleshwa units the average rent is Ksh.70,000 giving a total of Ksh. 70 million cash collections for Kileleshwa alone. Adding up with the ones along Mombasa road, the cash collections could get to Ksh. 200 million monthly.

    There have been reported cases of muggings when tenants go to pay cash. Our team made a visit to to the location of offices where tenants take the cash and established that indeed the alley to the Viraj offices is quite solitary and leads to a dead end. The road is also in a deplorable state with suspicious looking people strolling aimlessly along the stretch. Besides the security issues, tenants had requested that due to covid pandemic, social distancing would have been achieved if they were given an account to be paying to. This fell on deaf ears.

    Tax Evasion

    The other issue however is that cash collection is always a recipe for tax evasion since there is no structured way of accounting for the rent collected. Previous exposePrevious expose by tenants and a number of bloggers however saw KRA take no action. Indeed the Indian owners always brag of how they have the KRA officers on their payroll and that nothing can be done to them.

    A number of units have however been sold by the Viraj owners, but even with this, they treat the owners with contempt. Payment of service charge is done with no improvements being made on the common areas. Units that were previously sold for 17m canfetch only 12m currently because of the poorly managed common areas within the estates. There is no paintworks of the external building and the perimeter wall, poor gardening, poor electrical connections, poor/old drainage, age old water tanks, among others.

    The patriarch Viju Patel has since split the houses to the children and the Kileleshwa units were given to a son by the name Vijay Patel. The son, a well-educated man, is a sharp contrast to his wife who is illiterate and very arrogant. Indeed, the laid back Vijay has left the running of the once sought after estate to the wife named Jyoti.

    Jyoti has turned the once beautiful Viraj Estate  into an eye sore, comparable to the dilapidated County council estates. The money collected is wasted with no meaningful investment to improve the outlook of the estate. The two have run down what the founder Viju Patel, took years to build. So hardworking and dedicated was the partriarch that he recently became the first Kenyan to buy a Tesla model X 75D. Effort to reach Vijay and his wife Jyoti bore no fruit as our phone calls went unanswered.

    Apartments in Kileleshwa estate.

    We only hope that with 100% sale of the units to other owners, there will be restoration of the glory of the once beautiful Viraj Estates as what exists is the extreme bottom of the barrel.

     

  • KRA Goes After A Jubilee Party Financier For Sh2.5B In Tax Evasion From Gov’t Tenders

    KRA Goes After A Jubilee Party Financier For Sh2.5B In Tax Evasion From Gov’t Tenders

    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.

    BD.

  • Humphrey Kariuki Puts Up His Tax Dispute Ridden Africa Spirits For Sale

    Humphrey Kariuki Puts Up His Tax Dispute Ridden Africa Spirits For Sale

    Following a two-year battle with the courts on allegations of Sh41B tax evasion on his firm, the Janus Continental Group’s boss Humphrey Kariuki has decided to put for sale the scandal ridden Africa Spirits that’s in the middle of the circus with Kenya Revenue Authority(KRA).

    Mr Kariuki and his co-accused denied failing to pay tax of Sh17,782,553,085 to the commissioner of domestic taxes between January and December 2016.

    They are also accused of omitting Sh832,048,543 in Value Added Tax (VAT) for Africa Spirits Limited (ASL), an amount which had been included in the returns, for the period January to December 2016.

    For 2017, Mr Kariuki allegedly failed to remit Sh5,981,840,025 while ASL failed to remit Sh2,188,622,304. For 2018, the directors of Wow Beverages Limited (WBL) and ASL are charged with failing to remit Sh5,673,829,000.

    The run-ins with the authorities has taken toll of the reclusive billionaire who’s now considering selling it.

    Mr. Kariuki, has already received several offers to acquire his brewery Africa Spirits, reportedly, he has already turned down offers from London Distillers and 254 Brewing Company, which he deemed too low.

    He is currently in discussions with Keroche Breweries, a major Kenyan brewery, but is asking but is asking for more money and they have not yet reached an agreement. Kenyatta’s bitter aftertaste.

    In addition to their current negotiations, Keroche’s director Tabitha Karanja and Kariuki have another point in common. They were both in full support of President Uhuru Kenyatta on the campaign trail before being ensnared in his anti-corruption policy.

    In fact, this policy is what led Kariuki to put Africa Spirits up for sale. The common denominator between the Karanja’s and Kariuki is that they have all been attacked by the Kenyatta government despite having financed Kenyatta’s 2013 and 2017 election campaigns. They have become collateral damage in the big anti-corruption campaign organised by Kenyatta, who wanted to show that he was not taking action solely against his perceived political enemies.

    Keroche just like in Kariuki’s case, found themselves in the crossfire where the brewery was accused of Sh14B tax evasion in a case that also attracted political attention with many pointing accusing fingers at Statehouse for not being supportive of local industries. The case is still in court just like tbe Kariuki’s.

  • Israeli-Owned Road Construction Firm SBI Holdings On KRA Radar Over Sh1 Billion Tax Evasion

    Israeli-Owned Road Construction Firm SBI Holdings On KRA Radar Over Sh1 Billion Tax Evasion

    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.

    Image result for Solel Boneh International (SBI) Holdings"

    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.