Estama Investments denies owing Kenya Revenue Authority any dues

Estama Investments, the company at the centre of the Ministry of Health’s Sh1 billion mobile clinics scandal, has insisted that it does not owe the taxman any dues and has now filed a court application to suspend agency notices the Kenya Revenue Authority (KRA) issued to its bankers.

The firm claims in the fresh application that KRA audited its books of accounts in May last year and only found it to be in arrears of Sh1.1 million that was paid in full. The Sh1.3 million was in respect of VAT and PAYE, Estama Investments says.

KRA last week filed a suit seeking to freeze seven bank accounts owned by Estama Investments and its sister company Business Capital Access Limited until it completes an assessment of their books of accounts to determine how much tax is due from them.

The taxman in its suit says Estama Investments has been filing nil returns since incorporation in 2008 and that it is now moving funds to offshore bank accounts which may make recovery of any due taxes impossible.

Estama Investments now says that the Sh350 million moved to offshore bank accounts was for payment of its suppliers Guangzhou Moneybox Steel Structure Engineering Company Limited.

“The transfer was effected to the said supplier’s bank; China Construction Bank in honour of a commercial invoice and a proforma invoice issued on July 18, 2015 among other supply costs. The said funds were therefore not transferred in the manner and style alleged or for purposes of hiding the same from the jurisdiction at all,” Estama’s lawyers Nyachoti & Company Advocates say.

KRA however says Estama Investments overstated purchases while supplying the mobile clinics to Afya House, which greatly reduced the amount due in VAT.

The taxman says it wants to probe Estama’s books of accounts from 2010 to 2016.

“Preliminary findings have so far revealed that Estama claimed purchases amounting to Sh819,839,113.36 against imports valued at Sh33,764,330. This implies a variance of Sh736,859,357.72 which warrants further investigation. Estama may have been involved in tax fraud and under-declaration of chargeable income and making false returns of income which are offences,” KRA says.

Information contained in Estama’s filings with the Kenya Revenue Authority’s (KRA) digital platform, Simba, shows that the containers were bought in China, transported to Kenya and allegedly delivered to Nairobi at a cost of Sh1,461,388 – meaning the supplier pocketed Sh8.5 million for each unit sold to the government.

Official documents show that each of the portable clinics was to be kitted well enough to offer maternal and child health services, including family planning, immunisation, as well as emergency and outpatient services.

KRA says in its suit that Estama moved Sh776 million to an account owned by Business Capital Access. Of the amount, Sh356 million is still being traced.

Business Capital Access transferred the other Sh420 million to two of its KCB accounts. One KCB account received Sh370 million while the other received Sh50 million.

Business Capital Access then transferred Sh38 million from one KCB account to an Equity Bank account it also owns. The firm also wired Sh330 million to an unknown offshore account.

Estama Investments on the other hand had a Sh24 million balance. The firm then paid Sh5 million to a supplier Evamarine Limited, Sh6 million to its majority shareholder Njagi Makanga and Sh7 million to an individual only identified as Mumbi Makanga.

But Estama says in its defence that Business Capital Access is a sister company and that they on occasion borrow money from each other hence KRA is wrong to read suspicion in their exchange of monies paid by Afya House.

Anti-Corruption Court judge Hellen Ong’udi in a separate case filed by the Ethics and Anti-Corruption Commission (EACC) issued an order freezing four bank accounts Estama owns at KCB and Equity Banks for six months.

Lady justice Ong’udi issued the orders after the EACC said it intends to probe Estama and Afya House to establish whether the tender for supply of mobile clinics was done in accordance with the law, and that it is necessary to preserve the funds in the account until investigations are complete.

Estama in its response says that its 2015 tender award was not challenged and that it was the lowest evaluated bidder.

“Bidders were subjected to a tender evaluation process which included tax compliance among other parameters as required by the Public Procurement and Asset Disposal Act 2015 and thereafter, having met every requisite qualification and further having the lowest quoted bid, by a letter dated June 19, 2015 the PS Ministry of Health notified Estama Investments that its quoted tender sum of Sh10 million per container had been accepted,” Estama says.

Documents filed in court indicate that Afya House paid Estama Investments Sh200 million on January 8, 2016 for the first consignment of 20 mobile clinics.

The Ministry of Health then released Sh400 million to Estama Investments on June 24, last year, before releasing another Sh200 million to the firm six days later upon delivery of the mobile clinics for another 60 mobile clinics.

Estama says the Ministry still owes it Sh200m for 20 clinics.