A QUESTION OF TIME

A tax fraud case in Kenya has been stopped because the decision to charge the offender predated the revenue authority’s demand for payments

As so often happens in tax cases, it was a tip-off that first led to the prosecution of Kenyan tycoon Abdi Gedi Amin in the country’s criminal court in Mombasa.

In 2019, alerted to a possible problem with Amin’s tax affairs, the Kenya Revenue Authority (KRA) did some digging and concluded he was involved in fraud “relating to remission of taxes” for 2013-2018 amounting to about Ksh513m

(about R83m). Based on that, the authority charged him criminally.

But Amin at the time claimed he should not face charges for his failure to pay tax on the due date, because no tax assessment had been carried out. On that basis, he launched an urgent court application arguing for an order to stop the prosecution so that the correct procedure for demanding tax payment could be followed.

Earlier this year, the court granted an interim order staying Amin’s prosecution until it could finalise its decision. On June 16, the judge dealing with the matter, Eric Ogola, allowed Amin’s petition, with costs.

It was not without a fight. The KRA argued that Amin had been informed of the charges against him and had been taken through the proper process, including making a statement about the inquiry.

Moreover, the revenue authority said it is not mandatory to issue tax demands or assessments in relation to taxes. And though Amin had been given 60 days to pay the tax due, he also had the right to appeal.

The court heard the arguments from both sides, including Amin’s claim that he had the right to fair administrative action, to being given reasons for such action and to fair treatment before a decision to charge him could be made.

Counsel for the KRA urged the court to allow the prosecution to go ahead, saying there had been a full investigation of the matter before the decision to prosecute Amin was made.

As far as the judge was concerned, the question was not the correctness of the KRA’S decision to prosecute, but whether the decision-making process had been correctly followed. Ogola scrutinised the dates of the key moments leading up to Amin’s trial, and found that these proved decisive for the whole matter.

Investigations had begun on September 10 2019, and the demand that Amin pay the taxes was made on October 30 2019. But the charges against him had already been prepared and stamped on September 6 2019.

“It is clear that the decision to charge was made 24 days before a demand for tax was made,” said Ogola.

When the demand was made 24 days later, Amin filed a notice of appeal, but later withdrew that when he realised a decision to charge had already been made. He had seen “the futility of the process”, Ogola said, and so he went to court for a review instead.

In this case it was “patently clear” that the KRA did not extend procedural fairness to Amin. He had been charged 24 days before a demand for tax was made. According to Ogola, there was no doubt that Amin’s right to fair administrative action was breached.

No due process

The judge had a further concern about the KRA’S actions: the law is structured to allow parties to “exhaust internal machinery for dispute resolutions”. So, he said, it was contrary to legal procedures for the KRA to “rush to charge a tax objector in a criminal court” without first allowing him or her access to the full arbitral remedies provided in the law.

“The rush to court was in complete abrogation of any known fair processes leading to prosecution,” said Ogola.

In granting Amin’s application to stop the trial and follow correct procedure before initiating renewed prosecution, Ogola pointed out that there are, in fact, a further half-dozen trials involving Amin that will also now have to be stopped, as they involve the same facts and timeline.

The decision to charge Amin was made 24 days before a demand for tax was made