KRA seeks mil­lions in fake VAT probe

Business Daily (Kenya) - - FRONT PAGE - Gal­gallo Fayo gfayo@ke­na­tion­

Kenya Rev­enue Au­thor­ity (KRA) has writ­ten to com­mer­cial banks seek­ing pay­ment of mil­lions from the ac­counts of com­pa­nies it ac­cuses of in­volve­ment in a mas­sive tax eva­sion linked to fake value added tax (VAT) re­fund in­voices.

The tax­man says in court pa­pers that the tax re­fund racket is wide and elab­o­rate, and may have cost the Ex­che­quer more than Sh7 bil­lion.

“That the re­spon­dent con­ducted in­ves­ti­ga­tions and un­earthed a ma­jor tax eva­sion scheme by the spe­cific com­pa­nies,” says KRA in re­sponse to the com­pa­nies' suit.

KRA made the rev­e­la­tions in re­sponse to a pe­ti­tion filed by 23 com­pa­nies and their di­rec­tors chal­leng­ing the tax­man's de­mand that they pay mil­lions of shillings in lieu of taxes owed. The tax­man is seek­ing to re­cover about Sh300 mil­lion from the small and medium-sized com­pa­nies.

On Mon­day, the

com­pa­nies rushed to court ac­cus­ing KRA of de­mand­ing re­lease of the dis­puted amounts from their bank ac­counts de­spite a court or­der bar­ring it from mak­ing such de­mands.

Cres­cent Tech, one of the com­pa­nies that have sued KRA, said the tax­man had on Septem­ber 17 di­rected its bankers to pay out Sh17.4 mil­lion within 14 days, a move it says is in con­tempt of court.

KRA claims that the tax eva­sion racket starts with regis­tra­tion of com­pa­nies and the is­suance of a tax PIN. It says the com­pa­nies, which do not con­duct any gen­uine busi­ness or deal in any goods, then start print­ing and sell­ing Elec­tronic Tax Reg­is­ter (ETR) in­voices with­out ac­tual sup­plies.= The fake in­voices are then sold to other en­ti­ties, which use them to sup­port fake pur­chases in or­der to re­duce taxes payable.= The tax­man, for in­stance, ac­cuses Hall Ther­motank Equa­to­rial of us­ing such in­voices from 21 dif­fer­ent com­pa­nies between No­vem­ber 2015 and Fe­bru­ary 2017 to ac­count for ex­penses and re­duc­ing its tax obli­ga­tions by Sh56.3 mil­lion. Shanir Dis­trib­u­tors is ac­cused of us­ing sim­i­lar tac­tics to evade Sh3.5 mil­lion, Spec­tre Chem­i­cals (Sh16 mil­lion), Sri­man Trad­ing (Sh44.5 mil­lion) and Transpa­cific Lim­ited (Sh16.8 mil­lion).

KRA has re­jected Hall Ther­motank Equa­to­rial direc­tor Si­vathani Si­varaj' s claim that the tax­man is tar­get­ing busi­nesses op­er­ated by peo­ple of Asian de­scent, ar­gu­ing that the as­ser­tions are only meant to sen­sa­tion­alise the mat­ter.

The com­pa­nies, how­ever, in­sist that they have paid all their taxes and that KRA has not granted them the right to be heard and is tak­ing ar­bi­trary ac­tions, in­clud­ing freez­ing their ac­counts.

Two busi­ness­men were in April charged in court with evad­ing Sh7 bil­lion tax obli­ga­tions — the largest such case in Kenya. KRA ac­cused the busi­ness­men of us­ing fic­ti­tious in­voic­ing in ex­cess of Sh15, 369,511,856 to ex­e­cute their scheme.

KRA said it had car­ried out a sting op­er­a­tion in the res­i­dences of the two sus­pects and con­fis­cated cru­cial doc­u­ments and elec­tronic de­vices, in­clud­ing 10 ETR ma­chines. At the time, KRA said it was in­ves­ti­gat­ing 66 miss­ing traders and more than 2,000 ben­e­fi­cia­ries of the scheme.


TAX­MAN John Nji­raini, KRA com­mis­sioner-gen­eral.


PROBE KRA head­quar­ters in Nairobi.

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