TALES FROM THE KENYA REVENUE AUTHORITY

[jakaswanga]

TALES OF ROT FROM THE KENYA REVENUE AUTHORITY

CONTROVERSIAL TERM

The hiring of the new commissioner-general, Githii Mburu, brings to an end of the controversial term of Mr John Njiraini.

The commissioner-general attained the mandatory retirement age of 60 on December 19, 2017.

But when the government scrapped the retirement age of chief executive officers of state corporations, the move effectively defeated a lawsuit by activist Okiya Omtatah against his tenure.

A second suit to push him out failed too.

Mr Njiraini’s exit and sourcing of his replacement fuelled a boardroom war at KRA that had a dramatic end after it pulled President Uhuru Kenyatta’s hand to send nearly the entire board packing.

In other words, there has been something rotten, and rotting at the heart of Kenya's premier body, oversighting TAX INNINGS.

With that kind of pathology at a nation's core, a people never take off.

But first, a teacher's intro.

They are buried somewhere in my archives. I will dredge, fish them out and make them palatable for a Jukwaa series. These are studies on some of the institutions forged into place by Germany, The Federal republic of, to enforce a thrifty regime managing the famous loan from the USA. The Marshall.

Not interested in discovering the wheel twice, I had linked up with a certain Dr. Kotieno, an econometrist, to remodel the concept of THE HOUSE OF ACCOUNTING MATHEMATICS (OD KWAND PESA) and make it applicable to the peoples republic but, first, The Union of the Kavirondo principalities.

Those were the days we not taking any chances. There was talk of divorce in the air -See David Ndii's thesis; NASA had boycotted the repeat presidential vote in 2017 and the aspirant messiah, the Joshua Agwambo, was set to be sworn-in THE PEOPLES PRESIDENT. This could easily be a precursor to two separate republics. We doubted the unitary state of Kenya could survive the arrest and, Professor Githu advising, hanging of Raila for treason.

Elaborate contingencies seemed necessities.

A lot of us who had spent time in countries where state finances are not chaotic festivals of auto-cannibalism, had no intentions of spending their middle age in a peoples republic of Kenya (or the Union of Kavirondo Principalities for that matter) which recreated the financial illiteracy, corruption and economic debauchery of the unitary Kenya state launched by KANU in the 1960s. (First or second republic my foot!)

That is why we were discussing proven models of prudence, of zero tolerance to waste, with respect to state finances. And Germany with her cold-blooded ferocity was a good place to start. But of course it took them the mess of the Weimer republic to jar them awake!

But even then, there has to be this note of caution. When I was serving time in Germany, I discovered the Germans themselves are overawed by their little neighbours to the West. They call them swamp aborigines, but when it comes to the names of Jan Tinbergen and William Dress, the Germans sink back in reverence.

And no, those two are not ace footballers from Holland. No, that duo is, by German tales, the meanest and coldest madhafakaz who ever took control of a national treasury and a reconstruction project.

William Dress, the Dutch post-war prime minister and national book-keeper, was so mean and thrifty, so economical and anti-waste, so much so that he found the science of economics as practised thentofore, inadequate for his purposes. He put the best economic brains of the land under so much pressure that, while other countries entered the arms race and nuclear weaponry, the Dutch went the other way and invented a whole new branch of economics. They made a science of meanness, developed a theology of misery in the old meaning, ie budgetary thrift, more so of state finances. It is called econometrics and Jan Tinbergen is her father, intellectually speaking. He was rewarded with the Nobel price for economics and is immortalised in Rotterdam by having the high school of mathematical economics named after him. (In the continent, a high school is not what it is in the Anglosaxone lingo. A university lecturer is for instance titled High Teacher! A high school is a cutting edge research institute.)

Germany is no joke neither, and is an elephant economy, but I discovered when it comes to ingenuity in monetary efficiency, they stand aside and let the swamp aborigines ----or more derogatorily polder frogs------ show the way.

So I had to visit Amsterdam, not just to smoke pot and gape at Ajax versus Feyenoord, but to take a look at the only people who scare Germans just by raising their eyebrows. ---The story goes William Dress looked at Konrad Adenauer and told him. You don't need another port on your own soil, you idiot, you already have one. It is called Rotterdam. And so it came to pass, that for the next 50 years Rotterdam became the busiest port in the world! It would take Deng Hsiao Ping's red wirtschaftswunder to have Shanghai dethrone Rotterdam in business.

Wuothi eka ine, Dr. Kotieno agreed. We needed OD KWAND PESA a-la Jirman in our proposed Kavirondo caliphate. The Dutch, we agreed, are beyond our capacities of imitation! (these are a people with billionares who live in three-bedroom houses in municipality areas, bike to work on second-hand suits and go to public swimming pools. Then they spend $100M dollars buying a Van Gogh paintings to gape at, and a few millions less on genial black footballers --like Gullit Kluivert and Seedorf----- to amuse them and their people, at a profit!)

Unbelievable! Madness! (that is why the Germans insisted they could only de-activate their golden D-Mark on account a Dutchman, Wim Duisenberg, became the first custodian of The Euro! ie president of the European Central Bank! Italians and the French, I heard in the corridors, the Germans think of the way we think of Nigerians: natural born zeros so to speak!)

Kwand-Pesa is not accounting. It is mathematical monetary studies. (beware of its mutant variants which, left to run wild, aberrate into the total financialisation of the economy, which is now the orthodoxy functioning as the backbone of neoliberal fundamentalism!)

But that is another story.

The divorce didn't come. The Kenyan marriage proved elastic enough to accommodate many mpango wa kandos, and the presidency open-minded enough to suffer quite a crowd: a Trio. (Ouru and the two Rs, Raila and Ruto!). Unfortunately the open-minded Kenyan marriage continues to run a rotten houskeeping, which is to say, an accounting nightmare or a stone-age mentality of total financial illiteracy.

It is in that light that the stories which tell the tales of the top are very instructive. Which is why the following fascinates me.

THE CASE OF NJAMA WAMBUGU Versus JOHN NJIRAINI

Here:

KRA boss sucked into firm ownership row

Court papers indicate that Mr Njiraini, KRA General, has been sued by a city businessman, Mr Njama Wambugu, for allegedly initiating tax inquiries and demands with ulterior motives.

The chief taxman claims in his affidavit that emissaries sent by Mr Wambugu threatened to drag Mr Njiraini’s name in the mud if he did not stop tax investigations into the four companies.

A shareholding dispute in a Nairobi-based company has sucked in chief taxman John Njiraini in a complex case involving a tax dispute, an offshore company and proxy directors.

Court papers indicate that Mr Njiraini, the Kenya Revenue Authority Commissioner General, has been sued by a city businessman, Mr Njama Wambugu, for allegedly initiating tax inquiries and demands with ulterior motives, and putting pressure on the trader to forgo his shareholding in Space and Style Ltd, a multimillion-shilling supplier of building materials.

INVESTIGATIONS

But Mr Njiraini insists that he is not a shareholder in Space and Style, arguing that Mr Wambugu is using the court to blackmail him into helping the trader stop tax-related investigations into his firms.

“To my mind, these malicious and unfounded allegations are driven largely by my refusal to accede to requests by the 1st Petitioner, delivered through two emissaries between August and September 2018, seeking my intervention to halt tax investigations, said to have been in progress at the time against the petitioners,” Mr Njiraini says in court papers.

Mr Wambugu swore an affidavit that was filed at the High Court on March 4. 2019.

In his affidavit, in response to a petition by Mr Wambugu and four companies — Roser Roofing East Africa, A One Healthcare Limited, Tradeline Express Kenya and Citigates Development — Mr Njiraini says that KRA is pursuing over Sh159 million in taxes from the businessman’s companies.

The chief taxman claims in his affidavit that emissaries sent by Mr Wambugu threatened to drag Mr Njiraini’s name in the mud if he did not stop tax investigations into the four companies.
In his affidavit, Mr Wambugu, a shareholder in Space and Style Ltd, alleges that Mr Njiraini is a “proxy” shareholder of Decamis Ltd, a claim Mr Njiraini had denied in a previous letter written by his lawyers, Waweru Gatonye and Advocates.

TAX ARREARS

While Decamis Ltd is registered in Hong Kong, Mr Wambugu insists in various court papers that Mr Njiraini appointed Ms Cecilia Muhoho and Ms Lucy Kimani as his liaison persons, and that he (Njiraini) was brought on board Space and Lifestyle Ltd after helping the company resolve a multimillion- shilling tax dispute.
Registration documents filed in court show that Decamis Ltd is owned by Ms Lucy Kimani Mumbi and Ms Mary Wambui Njoroge, and it is not clear whether they are related to Mr Njiraini.

The KRA, in its response, says it accorded Mr Wambugu a fair hearing even as it demanded the tax arrears.

KRA says Mr Wambugu and his firms underpaid taxes, which the State agency says was discovered through intelligence gathering.
In the case of Tradeline Express, KRA says the firm owns properties but did not declare any rental income, and that it under-declared its sales.

For Roser Roofing, KRA says the firm under-declared income for VAT and corporation tax.
A One Healthcare has been accused of not paying VAT on imports, and of having vehicles that are not commensurate with the taxes the firm has paid.
Citigates, KRA holds, has not filed returns despite being registered for the same since 2007.
KRA wants the levy disputes left to the Tax Appeals Tribunal for determination.

PENDING

Before Decamis Ltd was brought in as a shareholder in Space and Style, the court documents say, some KRA officials had solicited Sh15 million to lower the Sh439.9 million demand for unpaid levies.

Space and Style founders N. Wambugu and Ms Winfrida Wanjiku Ngumi are said to have reported the officials’ action to the Ethics and Anti-Corruption Commission (EACC) on the recommendation of Mr Njiraini.
A KRA domestic taxes department manager, Mr Robert Maina Ngumi, was charged in the Milimani Chief Magistrate’s Court. The case is still pending.

While the tax issues were eventually resolved through an agent, Mr Edward Mwachingwa of Viva Africa Consulting, Mr Wambugu now claims that Mr Njiraini agreed to help only in resolving the tax issue on condition that he would be given shares in Space and Style.

Mr Wambugu alleges that the KRA boss promised to inject capital into Space and Style, and to procure lucrative contracts for the company.

As a result, the two original Space and Style directors ceded 2,500 shares each and transferred them to Decamis Ltd, a Hong Kong-registered company.
The Nation has seen registration documents for a related company, Decamis Global Ltd, also registered in Hong Kong.

Decamis Global is owned by Decamis Ltd (990 shares), Ms Lucy Mumbi Kimani (10 shares) and Ms Sylvia Wanjiku Kimani (no shares but listed as a co-owner).

COMPLETION

Space and Style was hardly in the news until January last year when squabbles between Ms Ngumi and Mr Wambugu emerged after it emerged that the latter was a director in Roser Roofing E.A Ltd, a rival tiles manufacturer.

In January last year, Mr Wambugu agreed to sell his stake in Space and Style to Ms Ngumi and leave the firm. Space and Style and Ms Ngumi both hired valuers to put a price on the company and its assets but to date there has been no consensus, which has delayed the completion of the deal.

On February 9 last year, Mr Wambugu executed a power of attorney in favour of Ms Ngumi in respect of the 4,197 shares pending the completion of the sale.

With the power of attorney, Ms Ngumi appointed three new directors which did not go down well with Mr Wambugu. The new directors were Lucy Mumbi Kimani, Edward Mulewa Mwachingwa — the Viva Africa agent that helped resolve Space and Style’s 2013 tax issues — and David Otieno Opiyo.

That was when trouble started in earnest.

FRUSTRATE

Mr Wambugu filed a case in the Milimani High Court’s commercial division through Havi & Company Advocates claiming that Ms Ngumi and Mr Njiraini were colluding to frustrate the exit agreement and deny him dues from the remaining 43,303 shares.

He sued Space and Style, Ms Ngumi, Cecilia Njoki Muhoho and the three new directors.

Mr Wambugu believes that his troubles with KRA, which has asked for bank records, is connected to the fight for his shares at Space and Style — and thinks that KRA boss has a hand in it.

He accuses Mr Njiraini of using KRA to initiate tax inquiries from him “for an ulterior and unlawful purpose” — and to “frustrate him from pursuing his legitimate claim in Space and Style Limited.”

Last year, Mr Njiraini’s lawyer warned Mr Wambugu’s lawyer against associating him with Decamis Limited. He dismissed as “blatantly malicious attempt to drag his (Mr Njiraini’s) name into matters of which he is not party to.”

This week Kenya's tobacco man has died. Rumours are TAX ISSUES! KRA manenos!

his name is Wilfred Murungi. He is the founder of the Mastermind Tobacco company. His battle against all the odds stacked by the monopolist BAT is well told by the trenchant John Kamau of the DN.


The late cigarettes entrepreneur Wilfred Murungi.

[jakaswanga]

THE SGR AND GOVERNMENT REVENUE

What is the political economy here?

Job cuts loom as KPA orders importers to use SGR freight trains

PATRICK BEJA and BENARD SANGA 07th Feb 2018

The directive issued by the Kenya Ports Authority (KPA) has left logistics and transport firms confused.

KPA ordered importers to transport all un-nominated cargo at the port to Nairobi via the Standard Gauge Railway (SGR) freight train.

This translates to 11 per cent of the approximated 500 containers released by the port every day.

FFF

High Mark Time!

Hauliers, freighters rail at order to move all cargo by train


NAIROBI, O4-08-2019:

In a public notice on Saturday, the Kenya Revenue Authority (KRA) and Kenya Ports Authority (KPA) ordered that starting Wednesday, all imported cargo going to Nairobi and beyond be transported on the SGR.

The latest push is likely to spark protests, with transporters already having opposed earlier attempts to force them to use the new line, arguing that it is more expensive compared with using trucks.
However, KRA and KPA insisted that the move was aimed at improving cargo logistics at the Mombasa port and the Nairobi Inland Container Depot.
SEE ALSO :Budget measures that can put the economy back on track
 “All imported cargo for delivery to Nairobi and the hinterland shall be conveyed by Standard Gauge Railway and cleared at the Inland Container Depot – Nairobi,” said the two agencies in the notice.
If implemented successfully, the new directive is likely to spell doom for the over 20 CFSs as well as hundreds of truckers operating across the region from the Mombasa base.

Let me say: monopoly by diktat. All business goes to so-and-so from this date. Die the competition!

But what do I know

Govt suspends order on compulsory use of SGR for cargo from Mombasa

NAIROBI, Kenya, Aug 6 2019, By LABAN WANAMBISI,

The government beat a hasty retreat Thursday night and suspended a controversial order on transportation of cargo from Mombasa to Nairobi by use of the Standard Gauge Railway (SGR).

“The order has been suspended to pave way for stakeholder consultations,” an official said, “there is consensus between the Kenya Revenue Authority (KRA) and Kenya Ports Authority (KPA) on this matter.”

Officials from both government agencies said a joint statement would be issued.

The suspension announced on Tuesday night came hours after the National Assembly directed Transport and Infrastructure Cabinet Secretary James Macharia to appear before the Transport Committee on Thursday to explain the directive issued last week, and which was set to take effect on Wednesday.
The directive stipulated that all cargo from the port in Mombasa shall be hauled the Inland Container Depot (ICD) in Nairobi for clearance.
The directive for the CS to appear was declared on Monday by Deputy Speaker Moses Cheboi as he granted a request by Mvita MP Abdulswamad Nassir to suspend House business for MPs to discuss the directive as a matter of national importance.

Over there at education, there is another no-consultations-man! Prof. Magoha!

Mvita MP Abdulswamad Nassir, Chairman of the House Public Investments Committee:

“It is currently unclear how much railway levy is being charged per tonne of goods transported. There are fears that the final cost of goods will be affected while road transport companies will be affected.”
“I therefore request the Government to provide the latest statistics on the cost and usage of the SGR and clarify who should the SGR exclusively as it is important to have a liberal market where private business persons can chose the mode to transport their goods,” said the Mvita MP.

And, Nassir didn't hear of this

Sh 4 Billion :- How taxpayers lost more than Sh4 billion in SGR land deals

8 Jul, 2018

An all-or-nothing order by State House on one of the Jubilee government’s pet projects led to the loss of billions of shillings as unscrupulous dealers descended on it to loot. An audit of the Standard Gauge Railway (SGR) that Sunday Standard has seen reveals how Kenyans lost more than Sh4 billion in intricate land compensation deals that oiled the 472-kilometre gravy train as it snaked its way from Mombasa to Nairobi.
At the heart of the scandal that led to the escalation of the project’s costs to punitive levels were employees of the Kenya Railways Corporation (KRC) and the National Lands Commission (NLC), both public owned institutions entrusted with the country’s interests.

There was no training or briefing done before the payment started. Temporary clerks were allowed to pay out part of the compensation billions.

Kenya Railways land audit Double payments “Because of pressure to handover the site, accountability procedures became secondary,” auditors say in their report. The report signed by Kenya Railways risk and audit manager Remmy Koech gives a peak into the lack of internal controls that gave NLC a free hand to spend public money without putting in place documents needed for accountability.
The report shows how fake compensation claims, double payments, over payments, inflation of land values and payment of people whose land was never on the corridor was used to loot taxpayer’s money.

ALSO READ: The last of the Lunatics Absence of oversight also helped create a fertile ground for theft.


It was so pervasive that at one point, Kenya Railways bought land from itself. There were instances where the names captured by the NLC schedules were different from those who eventually appeared in the Kenya Railways payment schedules.
Auditors also noted that there were at least eight cases where beneficiaries who were paid Sh1.7 billion appearing in the schedule could not be traced. They also listed 22 payments amounting to Sh1.1 billion made to individuals with neither names nor national ID numbers.
They found a ridiculous claim of Sh636 million on their own marshaling yard, which had been illegally subdivided into nine parcels, five of them appearing in the NLC compensation schedule. In another instance, individuals illegally squatting on railways and publicly owned land were compensated.

(Nairobi) and INLAND CONTAINER DEPOTS!

About 1,000 containers belonging to small traders are being held at the ICD on suspicion of tax evasion and bringing counterfeit goods into the country.

CLEARING CARGO

The magnitude of the problem came to the fore past week, when Kenya’s President Uhuru Kenyatta made impromptu visits at the depot two days in a row and ordered the vetting and registration of all import and export cargo consolidators to root out tax evaders.

Wanja Kiragu, operations director at the East African Online Transport Agency, says that clearing cargo should be supported by laws that define the roles of each agency, otherwise the crisis will persist.
For consolidated cargo, verification is complicated by the fact that some importers collude with consolidators to evade taxes through underdeclaration of cargo and importation of counterfeits. This has forced Kebs and KRA officials to intensify the crackdown through manual verification of each container and its cargo, a process that takes even months.
“Although the president gave a directive for containers to be released in three weeks, the process remains the same because it cannot be circumvented,” said William Ojonyo, Kenya International Warehousing Association chairman.

INSPECTION

Mid last year, Kebs and KRA came up with new rules that require that all consolidators for both air and sea cargo register with the standards agency and have their goods inspected under a new procedure.

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Nairobi faces logistics nightmare as inland depot cargo expands

Tuesday, March 12, 2019

Logistics experts have warned that should cargo continue being transferred to the Nairobi Inland Container Depot (ICD) at the current rate, it will cause serious congestion problems at the capital city.
Already, routes within the ICD are experiencing heavy traffic, with the Kenya Ports Authority (KPA) leasing remarshaling yards where goods that have stayed at the facility for more than 21 days — when they start attracting customs warehouse rent — are being transferred.

The Standard Gauge Railway (SGR) freight trains are railing 800 Twenty Foot Equivalent Units (TEUS) to the ICD daily, which in a year translates to 288,000 TEUs.
With the export cargo estimated at 55,000 TEUs plus empty containers, this means the ICD will be operating at over 80 per cent of its installed annual capacity of 450,000 TEUS, presenting a logistics nightmare.

[jakaswanga]

OF SOME BILLIONARE ENTREPRENEURS AND TAX RETURNS

Keroche Breweries owners Tabitha and Joseph Karanja arrested

Anthony Gitonga and Sara Okuoro 22nd Aug 2019



Center: Joseph Karanja, Keroche Breweries director and husband of the company's CEO Tabitha Karanja, is led away by policemen. [Anthony Gitonga, Standard]

Keroche Breweries owners Tabitha Karanja and Joseph Karanja have been arrested over alleged Sh14.4b tax evasion following orders from the Director of Public Prosecutions Noordin Haji.

The public prosecutor had on Wednesday ordered the arrest of Keroche Breweries Limited proprietors Tabitha Karanja and Joseph Karanja over allegations of Sh14 billion tax fraud.

The entrepreneurs through their lawyer James Orengo had on Thursday morning moved to court seeking to stop DPP Noordin Haji from prosecuting them for 10 counts of tax evasion.



Arrested: Keroche Breweries CEO Tabitha Karanja enters a police car. [Anthony Gitonga, Standard]


The couple spent the night holed up in their office in Naivasha as DCI and KRA officers camped at the gate.

SEE ALSO :Keroche stirs up rivalry with new beer

Thursday afternoon, court issued a search and arrest warrant to DCI officers seeking to arrest the couple who had locked themselves in their factory in Naivasha.

Keroche Breweries CEO Tabitha Karanja has however rubbished allegations that she owes KRA Sh14 billion in unremitted taxes terming the claims as a new war by her competitors.

"I’m shocked by the new allegations levelled against me, my husband and Keroche Breweries and this is pure malice," she said.

She questioned the timing of the arrest orders, just two weeks after she launched the KB Lager noting that the move was meant to intimidate her.

"This is a vendetta war launched by my competitors and am ready to face the taxman and the DPP to prove my innocence (sic)," she said.

SEE ALSO :Tabitha: 'My competitors are after me'

Nakuru Governor Lee Kinyanjui has condemned the manner in which KRA is treating the owners of the company which has employed over 500 people directly.

In a statement, the governor said that the onslaught against investors could derail employment and investment opportunities in the county.

Kenyans also took to the social media to lash out at the government and defend the Naivasha-based company noting that this spelt doom for local entrepreneurs.

Allegations

Ordering the arrest, Mr Haji said Kenya Revenue Authority Commissioner-General Githii Mburu submitted an inquiry file to his office on August 18 and an audit which established that Keroche had evaded tax totalling Sh14,451,836,375.

SEE ALSO :DPP Haji trains his guns on Keroche

The inquiry relates to the alleged failure to pay tax on various products manufactured and sold by the company from January 2015 to June 2019.

The DPP noted that investigations revealed that the company evaded paying Sh12.34 billion Value Added Tax (VAT), Sh329.4 million for stamps and Sh135.4 million for Crescent Vodka among other products.

The Karanjas' arrest comes hot on the heels of the arrest and arraignment of another beverage impresario — Humphrey Kariuki of Wow Beverages and Africa Spirits over alleged tax evasion.

on Monday, August 19, the billionaire appeared at the Milimani Law Courts in the company of lawyer Kioko Kilukumi to answer to charges of tax evasion.

Mr Kariuki and 10 others mainly drawn from Wow beverages and Africa Spirits are accused of among other things, evading tax amounting to more than Sh41 billion.

SEE ALSO :Keroche bosses in court seeking to stop arrest

The Director of Public Prosecutions Noordin Haji said early this month he had gathered enough evidence to prosecute Kariuki and Stuart Gerald (Directors WOW beverages), Peter Kuria (Director Africa Spirits), Robert Murithi (Director WOW beverages and Geoffrey Kinoti (Director Africa Spirits).

Others to face the seven separate charges include Sethu Prabhu (Assistant production manager Africa Spirits), Eric Nzomba (Driver) and Kepha Gakure (Tax manager Africa Spirits).

I like to laugh at certain things. If I were a forensic accountant investigator, and I presented the results of my investigations revealing a tax-fraud, and some politician or the culprit claimed malice, I would METICULOUSLY take them through my calculations and investigations, attaching legal clauses they breached, and SUE them for reputational damage!

But if one presents shoddy work, then these lawyers like Orengo and Kilokumi can dare claim there is no basis for prosecution.

This boy Haji is just a foot rag. When a competent prosecutor presents facts and documentation, even the most corrupt of Judges has no room to wiggle; and every fancy lawyer will sue for AN OUT OF COURT SETTLEMENT, and desist from empty braggadocio.

[jakaswanga]

How Henry Rotich dug Sh283bn tax hole

Monday September 2 2019


Treasury Cabinet Secretary Henry Rotich at a Milimani court on July 23, 2019. He has been accused of overseeing the dams scandal and revenue loss at KRA. PHOTO | FILE | NATION MEDIA GROUP 

In Summary

Tax collection was also frustrated with judges issuing ex-parte orders that stopped KRA from making tax demands on defaulters or investigating them.
Enforcing compliance has been dogged by corruption within KRA and failure by Treasury to put in place structures to resolve disputes.

 

By JOHN KAMAU


The Kenya Revenue Authority has been unable to collect Sh283 billion it had demanded from big taxpayers, thanks to a slow-paced Judiciary and failure by National Treasury to put in place a tax tribunal to resolve disputes.

The National Treasury, under Cabinet Secretary Henry Rotich, failed to constitute the Tax Appeals Tribunal for a year after the expiry of the previous team’s term in office, leaving the taxman at the mercy of defaulters who packed cases at a non-existent tribunal.
For the past 14 months, businesses and individuals aggrieved by KRA tax demands were all too happy to file appeals before a tribunal they knew had no quorum or was, at best, moribund.

Meanwhile, the disputed taxes could not be collected and KRA could do nothing. “Defaulters took advantage of this vacuum to lodge cases at the Tax Appeals Tribunal and we could only wait,” says KRA commissioner-general James Mburu, who took over in June.

Mr Rotich — who was dropped from Cabinet in the wake of Kimwarer and Arror dam scandals — only gazetted members of the independent tribunal on April 2019, some 12 months after the previous team exited leaving only the chairman in office.

LAXITY

​
By last week, the tribunal had not met, two months after they were sworn in by Judiciary Chief Registrar Anne Amadi, as more appeals continued to pile.
By last week, a total of 803 appeals had been lodged. “I hope they will be able to meet this month. Otherwise, cases will continue to pile up and our hands are tied,” said Mr Mburu.
The tribunal consists of a chairperson and at least 15 but no more than 20 members, who are appointed by the Cabinet Secretary.
The law requires that at least five members be advocates of the High Court of Kenya. The current chairman is Mr Moses Buyuka Obonyo, who was appointed on April 1, 2015 and whose term will expire on April 1, 2020.
In total, Mr Rotich appointed 19 members whose first term expired on April 2018.
And even though there was room for reappointing them, Mr Rotich did not, rendering the tribunal moribund for nearly a year.

TAX COURT

On April 15, Mr Rotich made fresh appointments, including Helen Winifred Achieng’, Wambui Namu, Mahat Somane, Delilah Kadzo Ngala, Tanvir M. Ali, Richard Rotich, Wilfred Nderitu Gichuki, Josephine Kemunto Maangi, Gabriel M. Kitenga, Timothy Kipsimian Chesire and Patricia Magiri-Anampiu.
Others were Eli Njeru, Catherine N. Mutava, Abraham Kibet Kiprotich, Geoffrey Karuu, Patrick Lutta Odongo, Mwai Mbuthia and Ponangipali Ramana Rao.
While the Act gives the CS the power to appoint members to the tribunal, it is not explicit on the duration in which the CS should make the appointments.
The Act is also silent on how long the CS should fill a position in the tribunal if a vacancy occurs.
Tax collection was also frustrated with judges issuing ex-parte orders that stopped KRA from making tax demands on defaulters or investigating them.
There are currently 667 tax-related cases pending in the courts relating to demands of Sh60.4 billion. “What we need is a tax court and that would help us resolve the issues urgently,” said Mr Mburu.

PROGRESS

Following a national outcry that the Judiciary was a stumbling block in both the war against corruption and collection of revenue, the Commissioner-General says they have of late seen some positive changes.
“The number of injunctive orders have dramatically reduced and people are no longer using the courts to stopping us from doing our work,” he says.

For instance in June, the High Court dismissed an application by Krystalline Salt, a salt production company, seeking to quash a Sh1.3 billion tax demand.

The company had gone to court last August seeking orders to stop KRA from demanding Sh1,358,754,214, arguing the decision was done in violation of due process as laid out in the Tax Procedures Act and in contravention of the Constitution.
In a separate case, Keroche Breweries Ltd CEO Tabitha Karanja and her husband Joseph Karanja denied Sh14 billion tax fraud charges before Milimani Chief Magistrate Francis Andayi.

Another notable case has been by lawyer Tom Ojienda who has had a running battle with KRA over a Sh443.6 million tax bill.

BETTING FIRMS

On November 2, High Court judge Chacha Mwita prohibited the Directorate of Criminal Investigations and KRA from starting civil or criminal proceedings against Prof Ojienda in respect to the tax issue.

The taxman has also been battling betting firms which are said to owe KRA over Sh61 billion in unpaid withholding tax.

In July, some 27 betting firms were closed as KRA flexed its muscles over the arrears.

It has now started charging companies in court arguing that “disputing tax does not absolve anyone from criminal culpability”.
Last month, directors of the Naivasha-based Keroche Breweries were charged over Sh14 billion tax fraud allegations.
Also arrested was billionaire Humphrey Kariuki; he has been charged with evading taxes worth Sh41 billion through his companies Africa Spirits and Wines of the World.
“A tax dispute is only civil when it is not deliberate,” says Mr Mburu.

REVENUE TARGETS

While the iTax database had close to four million taxpayers by June 2018, enforcing compliance has been dogged by corruption within KRA and failure by Treasury to put in place structures to resolve disputes.
While Treasury was quick to set high targets for KRA, it failed to give it support to collect debts, leading to a paralysis.
By June 2018, the taxman missed the target for the year by Sh106 billion, while that for the years ended June 2017 and June 2016 fell short by Sh66.6 billion and Sh12.4 billion respectively.

“The target is no longer an issue for me as long as all entities supposed to pay tax do so,” says Mr Mburu.
But whether a tax court will be put in place measures to resolve the disputes and hasten the tax prosecutions remains in the hands of the Judiciary.

Mr Rotich — who was dropped from Cabinet in the wake of Kimwarer and Arror dam scandals — only gazetted members of the independent tribunal on April 2019, some 12 months after the previous team exited leaving only the chairman in office

Worth noticing, is that this calculated laxity is now being repeated in the exit of the Auditor General, Eduard Ouko.

By design of course, that vacuum.

[jakaswanga]

Detectives probe KPA official over Sh6bn tenders

Sunday September 8 2019

The Directorate of Criminal Investigations (DCI) is investigating the possible loss of Sh6 billion at the Kenya Ports Authority over the past one year, the Sunday Nation has learned.
The amount in question is inclusive of some Sh2.5 billion that investigators believe might have been lost in the ongoing rehabilitation of the Kisumu Port.
On August 22, Transport and Infrastructure Cabinet Secretary James Macharia wrote to Director of Criminal Investigations (DCI) George Kinoti asking him to commence investigations in to the allegations of fraud at the parastatal.

COLOSSAL AMOUNTS

However, a week later, on August 29, Mr Kinoti wrote back to the CS complaining that the investigations were being frustrated by top port officials. Mr Kinoti urged the CS to take administrative measures that will see top KPA officials kicked out of office since they are suspected of hoarding documents and intimidating potential witnesses.
In particular, Mr Kinoti singled out KPA managing director Daniel Manduku, who was appointed to the position barely eight months ago, for interfering with exhibits and witnesses.


“The allegations disclose wide-ranging fraud and theft running into colossal amounts,” said Mr Kinoti in his letter to CS Macharia. This means that the CS will now have to instruct the board of KPA, whose chairman is the former Chief of Kenya Defence Forces Gen (Rtd) Joseph Kibwana, to take action against Dr Manduku and other top managers.
Besides Dr Manduku, investigators have also demanded that six other top managers at the institution be forced to step aside because other than being prime suspects, they occupy offices in which critical evidential material are domiciled. Mr Macharia had not replied to our request for comment by the time of going to press.

On Saturday, Dr Manduku replied to our queries with a curt statement he sent via WhatsApp: “The matter is under investigation.” When asked about the allegations of witness interference, he retorted: “No comment. Publish the story on page 1. Front page.”
Dr Manduku, an accomplished architect, was tapped to head KPA in May in acting capacity following the sacking of Ms Catherine Mturi-Wairi over inefficiencies at the port. Until then, Dr Manduku was the CEO of the National Construction Authority (NCA). He was confirmed to the post in November amidst protests by the local community that one of their own should have replaced Ms Mturi-Wairi.

EMBATTLED MD

According to an e-mail sent out on Thursday evening by his personal assistant, the embattled MD is set to address senior staff Monday morning.

“The Managing Director has scheduled a meeting with all Heads of Divisions and Heads of Department on Monday September 9, at 7:30 am at the New Conference room,” read the email from his PA Maureen Kimani. Various well-placed sources told the Sunday Nation that, at the heart of Dr Manduku’s tribulations, is the rehabilitation of the Kisumu Port which began in May at a projected cost of Sh3 billion. The port project is expected to increase maritime business and travels between the East African Community member countries as well as uplift the stature of Kisumu City.

That President Uhuru Kenyatta has taken the port rehabilitation project to heart is evidenced by the three inspection tours he has made so far, and which our sources said opened his eyes to possible graft that could taking place in the project.
Sources who accompanied the Head of State during his last impromptu visit to the project on July 6, while on his way back from a private visit to Tanzanian President John Magufuli, said President Kenyatta took issue with the slow pace and ordered the engineers on site to ensure the work is finished by August.
Journalists were locked out of the tour in which the President held a 30-minute closed-door meeting with engineers from Kenya Navy and officials from the KPA and Kenya Railways Corporation.
Our sources said an irate President openly berated Dr Manduku for the slow pace of works and what he saw as needlessly high cost of some of the rehabilitation works being undertaken at the port facility.

DISMISSED OFFHAND

“He was surprised when he heard that KPA had budgeted Sh2.5 billion for concrete works yet the contractors told him they were to be paid Sh600 million for the whole project,” said a source who was in the private meeting.

According to our source, the President then directed the NYS, Kenya Navy and the Kenya Prisons to take control of the project. “The revised budget by NYS for the concrete works came to Sh120 million,” said our source.  Our sources said President Kenyatta alluded to the loss of funds in the Kisumu Port project in his speech when he flagged off last week Kenya’s maiden consignment of crude oil.
“I want to tell you that even those of you here at the port, we are monitoring and watching. We know the money you wanted to spend there and the amount we have spent, as well as the amount you intended to spend,” he said.
Sources said inflating bills of quantities for concrete and electrical works is one of the biggest corruption conduits at KPA. One of the KPA general managers has thrice brought up the issue in the executive committee meetings but has been dismissed offhand, our source disclosed.
Also under investigation are concrete works running into over Sh1 billion at a yard in Nairobi’s Makongeni area. KPA wanted to lease the yard from Kenya Railways for expansion but KPA proceeded to spend colossal money on it even before the lease could be agreed upon.

CARGO CLEARANCE

On Thursday, Kenya Railways acting Managing Director Philip Mainga, while recording statements with the investigators, denied ever leasing the yard to KPA.
“Kenya Railways has told us there was a discussion to lease the property to KPA but that process hasn’t taken place yet. So it would appear KPA managers were just looking for ways of spending money. It’s a scandal of monumental proportions,” said a source in the investigations team.

 In his fiery speech in Mombasa last week, the President took a swipe at top port officials for frustrating his signature project, the Standard Gauge Railway, by starving it of cargo business. Highly placed sources said KPA officers were slowing down the clearance of cargo in order to create an artificial congestion so that containers being offloaded from ships can be diverted to Container Freight Stations in Mombasa, which are owned by a few wealthy individuals.
“We know what you are planning — slow down things so that the cargo goes elsewhere,” the President said. KRA has been complaining of dipping revenues at the port in recent times and on Friday Acting Finance CS Ukur Yattani and KRA Commissioner General Githii Mburu addressed the KPA management over the issue.

Investigators will also be seeking to understand why KPA, which is one of the most profitable parastatals in the country, overran its budget by Sh2.3 billion in the 2018/2019 financial year, without the approval of the board.
An attempt by the MD to have the board validate the expenditure forced two board members to report to the DCI claims of impropriety in the organisation. The company has so far overran its first-quarter budget by Sh800 million, according to our sources.

FALLING OUT

Dr Manduku’s tribulations were compounded by a whistleblower within KPA who wrote to investigative authorities about alleged plunder at the institution, ostensibly at the behest of the MD.
On July 16, Mr Joseph Patterson Okakho, who was the former acting head of ethics and integrity at KPA, wrote to Mr Kinoti detailing his tribulations at the hands of Dr Manduku after he queried the integrity of a number of contracts awarded by the company.
“Briefly, problems started in May 2018 after Dr Manduku took over as acting Managing Director at the Kenya Ports Authority,” said Mr Okakho in his 18-page statement.
The whistleblower said that, soon after the MD was appointed, former Transport Principal Secretary Prof Paul Maringa instructed him to quickly bring Dr Manduku up to speed on the importance of corruption prevention at KPA.
“My encounter with the acting CEO was very brief – less than two minutes. I had organised a briefing of 20 minutes, but he only gave me less than two and showed little interest in anticorruption,” he said.
Mr Okhako said his work led to his falling-out with his boss who punished him for allegedly leaking company secrets by first demoting him and transferring him to the Kisumu Inland Container Depot as principal officer.

COLLISION COURSE

He said he detected a breach of policies and regulations as early as the July-to-November 2018 period. For example, he said he opposed in October 2018 a training programme on procurement suggested by private consultants and which the MD had approved.
“This would have cost between Sh12 million and Sh14 million in travel expenses, accommodation and tuition fees for over 64 members of staff, “said Mr Okako.
He added that the training had not been budgeted for by KPA and was not captured in the KRA training needs analysis. “After a few days, the firm wrote an email…cancelling the training in Kisumu.”
He said he did not have peace as the head of ethics and integrity since then and was allegedly accused of sharing information with the DCI and the anti-corruption agency.
“These accusations…started immediately after I intervened and stopped that particular training expenditure,” he said, claiming that the “MD became very “uncomfortable with me”.
He said he had various meetings with board chairman Gen (Rtd) Kibwana to register his concerns over the CEO’s disinterest in corruption prevention. “However, I did not get any help from the chairman of the Board despite many questions I raised with him,” he said.
In total, he raised queries on 12 projects that KPA was undertaking but which he thought had not followed the law. Mostly, he was not given answers and this set him on a collision course with his boss.

BLOCK BARRIERS

 For example, one of the project he raised issues with is the manufacturing of 10,000 block barriers at a cost of more than Sh650 million. The tender was awarded to seven companies, and each was supposed to supply 1,380 barriers each at a cost of Sh94 million.
“The question is why so many barriers? What are they for? Where are we going to use all these barriers? If we wanted all those barriers, why did we split the tender?” Mr Okakho posed in his statement to the police.
In a letter to DCI Kinoti dated August 19, Mr Okakho said the MD had personally threatened him with dismissal if he continued giving information to investigative agencies.

“On August 12, I got a WhatsApp call from the MD himself. The call was short and threatening and I quote, “…..what is this report I hear you filed with DCI and EACC?”

Mr Okakho claimed the MD added: “…..I don’t want to hear about reports being made outside KPA…, you stop what you are doing or I will have you sacked.”
Two days later, Mr Okakho was called to appear before a disciplinary committee over his alleged misuse of social media platforms.
Mr Okakho declined to attend the disciplinary hearing and instead appealed to the DCI for protection, which prompted Mr Kinoti to write to CS Macharia to take administrative action against Dr Manduku and other senior officials.