Amid hurdles, KRA seeks billions in tax arrears from super rich club

The taxman has put on the radar over 50 high-net-worth Kenyans and is demanding more than Sh10 billion in tax arrears from them.

At the same time, Kenya Revenue Authority officials are raising alarm over the continued use of courts by the country’s billionaires and super elite to escape payment of taxes, which for years has been the burden of the middle class.

TAX APPEALS

Rather than go through the Tax Appeals Tribunal — the body mandated by law to hear such cases — the super elite are increasingly getting court orders that stop KRA in its tracks whenever they receive a demand notice from the taxman.

In April this year, the Court of Appeal, in a precedent-setting ruling, held that tax queries should be addressed to the Tax Appeals Tribunal following a case in which KRA was seeking Sh2.5 billion in taxes from Mr Ibrahim Noor Hillowly, the Eastleigh-based sugar baron who had imported 40 million kilos of sugar. The trader had ignored the Tax Appeals Tribunal and gone directly to the courts.

So far, a highly placed source told the Nation, KRA has been stopped from collecting Sh40 billion from such individuals and entities through the courts.

The money is equivalent to what the World Bank’s International Finance Corporation hopes to give Kenya this financial year, or the worth of the 15-year Treasury bond that was floated this month.

LIFESTYLES

While last month President Uhuru Kenyatta asked KRA to track high-net worth individuals whose lifestyles were not reflective of the taxes they paid, the tax collectors are realising, in dismay, that they will not have it easy, after all.

A few days ago one of the individuals on the KRA radar, Prof Tom Ojienda, got an order from Justice Eric Chaacha Mwita that prohibited the officials, agents, servants and employees of KRA from starting “any civil or criminal proceedings, arresting, summoning, questioning, threatening or in any way harassing (Prof Ojienda) with respect to any tax issues or questions for the period 2009 to 2016”.

ANONYMITY
“That means we cannot touch Prof Ojienda,” said a KRA official, who sought anonymity because of the sensitivity of the matter. “We are getting a lot of such ex parte orders that are really frustrating our quest to collect taxes.”

KRA had previously demanded Sh443.6 million from Prof Ojienda as tax due for the period 2009 to 2016, and a further Sh378.6 million for the period 2011 to 2016.

The money had been received from Mumias Sugar Company and the County Government of Nairobi, according to KRA. But this demand was quashed by Justice George Odunga, who accused KRA of being “unreasonable and irrational”.

DEMANDS

Prof Ojienda, who KRA regards as non-tax compliant, is a member of the Judicial Service Commission, which approves the appointment and promotion of judges and magistrates. He contests the demands by KRA.

Also on the spotlight is Mr Hassan Zubeidi, a former executive of Dubai Bank. KRA is seeking close to Sh600 million in tax arrears from the founder of the collapsed bank, which was put under receivership in 2015 for falling behind on its debt obligations and failing to remit the regulatory cash reserve ratio requirement of 5.25 per cent.

Until June this year, Mr Zubeidi enjoyed the benefits of a court order that stopped further investigation and prosecution over alleged malpractices at the bank by the Directorate of Criminal Investigations.

GAZETTE

“He is one of the people we are targeting,” said a source familiar with the list of 50, and who anticipates that the former banker will also rush to court.

The other problem facing the taxman is that Treasury has yet to gazette members of the Tax Appeals Tribunal after the three-year term of its 19 members expired on April 1 this year. At the moment, only the Tribunal’s chair, Mr Moses Buyuka Obonyo, is in office legally, thus complicating efforts to hasten the collection of taxes from the super-rich. Mr Obonyo’s term ends in April 2020.

Also on the KRA radar is tobacco millionaire Wilfred Murungi. A year ago, KRA won a case against Mr Murungi’s Mastermind Tobacco when the Court of Appeal upheld the High Court’s decision to allow the taxman to recover Sh442.2 million in unpaid tax.

JUSTIFIED
In quashing the tobacco firm’s appeal, the court said it was satisfied that the taxman was legally justified to recover the money and dismissed the entire case as lacking merit.

But, as KRA seeks to recover more money from Mastermind, it must also defend itself in court as the company has sued the Commissioner of Domestic Taxes over some Sh1.9 billion the State agency is demanding as unpaid arrears of excise duty, VAT and PAYE.

KRA sent a demand notice on August 31 for the period between April and July this year.

The body is also trying to prosecute two businessmen who were in April charged in court with evading Sh7 billion tax obligations, the largest such case in Kenya. KRA accused the businessmen of using fictitious invoicing in excess of Sh15 billion to execute their scheme.

BILLIONAIRES
Besides individuals, the estates of former billionaires Njenga Karume and Gerishon Kirima are also being targeted by the taxman.

Others are firms, which include Kenya Pipeline Company, which has moved to court to stop KRA from freezing its bank accounts over a Sh174 million tax claim linked to two firms that were awarded a Sh1.1 billion design contract for the Nairobi-Mombasa line.

The taxman is holding KPC liable for tax due from Sheng Li Engineering and Consulting Limited and Kenya-based Kurrent Technologies, the consortium awarded the tender to design the project in 2012.

KPC has asked the High Court to issue temporary orders lifting KRA’s demand notices.