Tatu City directors evaded tax

Directors of Tatu City company failed to tell the taxman the real value of land sold to a university, documents provided to Parliament by a former director of the firm reveal.

Stephen Mwagiru was last week directed to provide documents in Parliament to support allegations that the company declared false figures to the taxman hence causing loss of revenue.

The land was sold to Jomo Kenyatta University of Agriculture and Technology for Sh842.4 million but Tatu City's foreign directors declared Sh235 million as its value, Mr Mwagiru said.

He also said Tatu City and Kofinaf Co Ltd had been committing stamp duty fraud using a scheme that saw them form special purpose vehicles (SPV) to which they transferred the land at highly discounted value without paying any stamp duty.

“In some instances, the companies have paid duty based on this highly deflated price,” he said.

Mwagiru had claimed when he appeared before the National Assembly Lands committee that foreign counterparts were repatriating billions of shillings from the sale of land in Kenya to offshore accounts in Mauritius.

But on Wednesday, he swore a second affidavit to demonstrate that Tatu City Ltd and Kofinaf Co Ltd “are involved in massive stamp duty and income tax fraud”.

Two parcels

Another buyer, Splendor Investments, bought two parcels of land whose combined value was Sh2 billion but this was declared as Sh559 million at the Ministry of Lands.

Committee chairperson and Kitui South MP Rachael Nyamai had directed Mwagiru to provide documents to back his claims that Tatu City's foreign bosses were engaged in tax evasion through understating of value of property sold by the company.

In the document, Mwagiru gave the committee a full summary of land transactions from the companies’ board circulated by Josphat Kinyua, a former vice president of Renaissance, indicating progress on the sales, buyers, selling price, deposits paid and balances due.

According to the documents presented to the committee, Splendor Investments bought from Tatu City plot number LR 11486 for Sh1.19 billion but Tatu City declared Sh340 million as its real value.

It also purchased LR 11428 at a cost of Sh884 million but the valuation declared by Tatu City was Sh219 million

Hefty investments intended to slash the losses are yet to bear fruit, as indicated in official Government records. The firm lost 1,937 gigawatts in 2017 alone - worth more than Sh30 billion.

Pilot project

In 2016, now retired CEO Ben Chumo contracted Toshiba Transmission and Distribution Systems to pilot a project that would ensure the losses were minimised.

But Energy Cabinet Secretary Charles Keter told The Standard yesterday that the projected energy matric was “perfect”, citing that there would be no idle capacity.

He said wind and solar were not stable sources, informing the need to have more predictable generation plants to handle the base load.

“I can assure you we will not have any idle capacity from our projections so no one should be worried,” he said.

A spokesman for Kenya Power said the requests for approval of higher electricity prices were sent to the ERC in 2015 but most of the concerns had since been addressed.

“A lot has happened in the three years so we are satisfied with the approved prices,” said Corporate Communications Manager Johnstone Turana.

He termed the transmission losses “lost revenue” for the firm that were not factored in the pricing of electricity. Ideally, the transmission losses should be part of operating costs.