KRA audit recovers Sh4 billion from tax cheats

By Jackson Okoth

The Kenya Revenue Authority (KRA) has recovered some Sh4 billion in unpaid taxes.

This followed its audit of several big multinational firms suspected to be engaged in tax evasion schemes.

Investigations by the tax authority, which begun in 2007, has so far covered an estimated 40 multinationals and large companies, especially those that perpetually declare losses even when the business climate show otherwise.

“We have for instance been suspicious of large and highly successful multinational firms that keep on posting modest profits or even losses,” said John Njiraini, KRA Commissioner General.

Closing shop

“The strange bit about most of such firms is that they comfortably continue operations instead of closing shop as expected of any loss-making venture — a fact that has served to raise our suspicions,” Njiraini said on Tuesday while addressing an international tax conference at the Strathmore School of Business, Nairobi.

The four-day technical tax conference, whose theme is prevention and control of tax evasion, brings together 38 tax administrators from across the world with KRA as the host.

The list of those attending includes the Commonwealth Association of Tax Administrators, African Tax Administration Forum and World Customs Organisation among others.

During on Tuesday’s session, Njiraini revealed that since the tax collector commenced audits on tax evasion schemes, several large multinationals that have been posting losses are now in the tax bracket.

“Incidentally, most of these loss-making multinationals are in the export business and therefore are beneficiaries of Value Added Tax Refunds and yet they give back nothing,” said Njiraini.

In 2010, KRA joined a global network to help in dealing with challenges posed by transfer pricing. It has since signed several tax information exchange agreements with several tax havens including Bermuda and Cayman Islands.

KRA is now part of a global network that shares information on tax matters, a forum that gives it a platform to deal with international tax avoidance.

The authority is also relying on building capacity and training its staff to nab tax cheats.

During the forum, KRA gave a list of items that are exempted from VAT, including all unprocessed foods such as vegetables, maize flour, beans, eggs, bread, rice, infant food preparations, sanitary pads, fertiliser and selected seeds.

“We had to reform VAT to remove bottlenecks to doing business and make Kenya more competitive,” Njiraini said, adding that the move had little to do with raising revenue from the poor.