KRA probes Sh100m tax racket

NAIROBI - Investigators from the Kenya Revenue Authority are probing a tax evasion syndicate at the port of Mombasa involving export of hides and skins, with allegations of drug trafficking also emerging.

The syndicate, according to a confidential investigation brief has led to loss of more than Sh100 million in taxes in a year.

The schemes involve fictitious declaration of taxes, understatement of weights and values and cross-stuffing cargo in the suspicious trade in raw hides and skins.

In one of the trade patterns that attracted the attention of the detectives, an alleged transit of raw hides from South Sudan passed through the port of Mombasa destined for Colombo in Sri Lanka.

The same consignment was offloaded from the Sri-Lankan Port and eight days later returned to the port for shipment to Nigeria.

“We had first suspected that the cargo may have originated in Kenya but was concealed as a transit outward consignment. The shipment to Colombo and then a transshipment to Nigeria just a week later through the Mombasa port added to our suspicion and triggered an investigation that has flagged various anomalies in the suspicious trade,” an investigator involved in the probe disclosed in confidence.

The detectives had for a while suspected the use of raw hides and skins to conceal drugs owing to the strong stench that comes from the consignments, which largely make it hard for thorough inspection by port officials. The raw hide is said to be left to rot inside closed containers to produce a strong stench that few can come close to.

Port officials have also questioned the link to Sri-Lanka, a major narcotics hot spot, according to the United Nations Office on Drugs and Crime and the final destination to Nigeria raised further questions.

The use of raw hides and skins, apart from providing easy camouflage for the drugs, is also said to be a lucrative tax evasion mechanism.

Kenya levies as high as 80 percent tax on raw hides and skins to encourage value addition within the country before export. Once processed, there is no export duty on the products.

The syndicate is said to have thrived in the declaration that the raw hides and skins were on transit, even when sourced locally, evading the millions in taxes, according to the analysis covering January to August.

The analysis found that 43 such consignments had passed through the port of Mombasa with understated weight by 325, 344 metric tonnes and suspected to have evaded Sh25.3 million in export duty.

KRA is now investigating seven clearing and forwarding firms involved in the tax evasion racket and possible drug trafficking.