The Kenya Revenue Authority (KRA) is losing billions of shillings in a sophisticated tax evasion scheme by its employees and a cabal of importers with Namanga border being the hotbed.
The scheme is so intricate as it involves KRA employees who allow the use of single-entry invoices to aid the misdeclaration, which denies the agency billions in revenue. In the cases flagged this month, the agency could have lost more than Sh250 million had the crooks succeeded.
“An old invoice entry will have up to 25 trucks but it can be used to sneak in more than double this number. This scheme is thriving at border points where KRA has either ‘weak’ surveillance or compromised employees. Crooked importers declare goods of less value to pay less taxes,” a local publication established.
KRA acting commissioner for customs and border control, Pamela Ahago, admitted that they were aware of the maize-for-LPG scam at Namanga. “This particular case is under investigation. It was unearthed after an undercover operation by our intelligence teams with support from other agencies, including the Directorate of Criminal Investigations (DCI),” Ms Ahago said, denying that her employees were complicit in the scam.
The tax agency has at least 20 scanners, including three fixed for cargo at the Port of Mombasa. It also has four drive-through scanners at the Inland Container Deport in Nairobi (ICDN) and a dozen baggage scanners at border posts, the Jomo Kenyatta International Airport and Moi International Airport in Mombasa.
KRA has also lost billions through the missing trader tax scheme, where some companies were found to be actual importers of various goods, but had under-declared to pay less duty and VAT.
“To claim Input VAT, the companies had resorted to buying invoices to inflate purchases; effectively minimising their VAT obligations,” KRA Commissioner-General James Mburu said in his August tax bulletin.
The Commissioner for Intelligence and Strategic Operations, Dr Terra Saidimu, said that in 2019, the agency completed 187 investigations on unethical behaviour involving its staff.
“Our staff are required to uphold integrity in their duties. Last year, 51 of our staff were terminated, while 47 were taken through a performance improvement programme,” Dr Saidimu said.
In the last three years, KRA has been struggling to meet its revenue collection obligations, but recorded a slight improvement in the 2019/20 financial year, managing Sh1.607 trillion, compared to Sh1.580 trillion in the previous financial year. However, it still missed its initial target by Sh275 billion.
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In its annual report released last week, Mr Mburu admitted that investigations had revealed sophisticated tax evasion schemes.
“In the 2019/20 financial year, we profiled 1,309 individuals and companies, which led to the identification of tax evasion schemes with tax-loss estimated at Sh259 billion. There will be further investigations and legal action for non-compliance,” he said.
In the 2019/2020 financial year, Customs and Border Control (C&BC) revenue collection stood at Sh510.63 billion, a reduction of 2.8 per cent compared to the previous financial year.
HERE IS THE FULL EXPOSE OF TAX EVASION SCHEME AT NAMANGA BORDER
