Evans Habil | Nation Media Group
What you need to know:
The Kenya Revenue Authority (KRA) is losing billions of shillings in a
sophisticated tax evasion scheme by its employees and a cabal of
importers.
Trucks show up at compromised border posts and log the wrong cargo in the import declaration form (IDF). The KRA workers then clear the goods. Namanga is the favourite border point for these traders.
On August 17, for instance, a truck trainer registration number KBV 459W/ ZE3848 drove into the border station from Tanzania.
While filling the custom entry form 2020NMA169997, the importer declared that he was carrying maize seeds. But when the truck was put under the scanner, it was found to be ferrying liquefied petroleum gas.
“Entry No 2020NMA169997 CPC C400 shows the item in the tank.
However, the item description in the entry of the exit note provided
does not tally with the image. Conclusion is an anomaly,” the inspection
case report states.
In another incident, an IDF generated in Tanzania on August 4 under import declaration number 2020NMA169330, showed a truck was ferrying LPG gas. However, when analysed and searched on other systems, the same IDF number showed it had saw dust.
A closer look at consignments transported under this invoice reveals
that it had five import declaration forms, with each of them having up
to 20 further entries. By using a single invoice, the crooks
under-declare the quantity imported, with over 100 trucks, and 2,200
metric tonnes of gas unaccounted for.
KRA has flagged four trucks (KBQ 368C, KCN 489H, KCK 360F and KBW 365C) at Namanga for mis-declaring.
Another case involves two trucks, registration numbers T256CAC and T625CAZ, which saw the Western Seed Company based in Lusaka, Zambia, import “27, 000 kilogrammes of maize seed” worth Sh261.7 million.
In their IDF, the agent declared that the trucks had “maize seed variety WH505”. The duty due to KRA from this was Sh14.4 million. However, on inspection, the trucks had LPG gas.
The scheme is so intricate as it involves KRA employees who allow the use of single-entry invoices to aid the misdeclaration, which denies the agency billions in revenue. In the cases flagged this month, the agency could have lost more than Sh250 million had the crooks succeeded.
“An old invoice entry will have up to 25 trucks but it can be used to sneak in more than double this number. This scheme is thriving at border points where KRA has either ‘weak’ surveillance or compromised employees. Crooked importers declare goods of less value to pay less taxes,” the Nation was told.
KRA acting commissioner for customs and border control, Pamela Ahago,
admitted that they were aware of the maize-for-LPG scam at Namanga.
“This particular case is under investigation. It was unearthed after an
undercover operation by our intelligence teams with support from other
agencies, including the Directorate of Criminal Investigations (DCI),”
Ms Ahago said, denying that her employees were complicit in the scam.
The tax agency has at least 20 scanners, including three fixed for cargo at the Port of Mombasa. It also has four drive-through scanners at the Inland Container Deport in Nairobi (ICDN) and a dozen baggage scanners at border posts, the Jomo Kenyatta International Airport and Moi International Airport in Mombasa.
KRA has also lost billions through the missing trader tax scheme, where some companies were found to be actual importers of various goods, but had under-declared to pay less duty and VAT.
“To claim Input VAT, the companies had resorted to buying invoices to inflate purchases; effectively minimising their VAT obligations,” KRA Commissioner-General James Mburu said in his August tax bulletin.
“Our staff are required to uphold integrity in their duties. Last
year, 51 of our staff were terminated, while 47 were taken through a
performance improvement programme,” Dr Saidimu said.
In the last three years, KRA has been struggling to meet its revenue collection obligations, but recorded a slight improvement in the 2019/20 financial year, managing Sh1.607 trillion, compared to Sh1.580 trillion in the previous financial year. However, it still missed its initial target by Sh275 billion.
In its annual report released last week, Mr Mburu admitted that investigations had revealed sophisticated tax evasion schemes.
“In the 2019/20 financial year, we profiled 1,309 individuals and companies, which led to the identification of tax evasion schemes with tax-loss estimated at Sh259 billion. There will be further investigations and legal action for non-compliance,” he said.
In the 2019/2020 financial year, Customs and Border Control
(C&BC) revenue collection stood at Sh510.63 billion, a reduction of
2.8 per cent compared to the previous financial year.
aolingo@ke.nationmedia.com
Trucks show up at compromised border posts and log the wrong cargo in the import declaration form (IDF). The KRA workers then clear the goods. Namanga is the favourite border point for these traders.
While filling the custom entry form 2020NMA169997, the importer declared that he was carrying maize seeds. But when the truck was put under the scanner, it was found to be ferrying liquefied petroleum gas.
Import declaration
Documents seen by the Nation show the ‘maize cargo’ came from Zambia, but the KRA image analyser exposed this scheme.In another incident, an IDF generated in Tanzania on August 4 under import declaration number 2020NMA169330, showed a truck was ferrying LPG gas. However, when analysed and searched on other systems, the same IDF number showed it had saw dust.
Multiple entries
Other than mis-declaring, the crooks have also been using single entry invoices to register multiple entries. For instance, an import declaration invoice registered on May 20 showed the agent using one invoice to bring in 2, 200 metric tonnes of LPG valued at Sh11.6 million.KRA has flagged four trucks (KBQ 368C, KCN 489H, KCK 360F and KBW 365C) at Namanga for mis-declaring.
Another case involves two trucks, registration numbers T256CAC and T625CAZ, which saw the Western Seed Company based in Lusaka, Zambia, import “27, 000 kilogrammes of maize seed” worth Sh261.7 million.
In their IDF, the agent declared that the trucks had “maize seed variety WH505”. The duty due to KRA from this was Sh14.4 million. However, on inspection, the trucks had LPG gas.
The scheme is so intricate as it involves KRA employees who allow the use of single-entry invoices to aid the misdeclaration, which denies the agency billions in revenue. In the cases flagged this month, the agency could have lost more than Sh250 million had the crooks succeeded.
“An old invoice entry will have up to 25 trucks but it can be used to sneak in more than double this number. This scheme is thriving at border points where KRA has either ‘weak’ surveillance or compromised employees. Crooked importers declare goods of less value to pay less taxes,” the Nation was told.
The tax agency has at least 20 scanners, including three fixed for cargo at the Port of Mombasa. It also has four drive-through scanners at the Inland Container Deport in Nairobi (ICDN) and a dozen baggage scanners at border posts, the Jomo Kenyatta International Airport and Moi International Airport in Mombasa.
KRA has also lost billions through the missing trader tax scheme, where some companies were found to be actual importers of various goods, but had under-declared to pay less duty and VAT.
“To claim Input VAT, the companies had resorted to buying invoices to inflate purchases; effectively minimising their VAT obligations,” KRA Commissioner-General James Mburu said in his August tax bulletin.
Unethical behaviour
The Commissioner for Intelligence and Strategic Operations, Dr Terra Saidimu, said that in 2019, the agency completed 187 investigations on unethical behaviour involving its staff.In the last three years, KRA has been struggling to meet its revenue collection obligations, but recorded a slight improvement in the 2019/20 financial year, managing Sh1.607 trillion, compared to Sh1.580 trillion in the previous financial year. However, it still missed its initial target by Sh275 billion.
In its annual report released last week, Mr Mburu admitted that investigations had revealed sophisticated tax evasion schemes.
“In the 2019/20 financial year, we profiled 1,309 individuals and companies, which led to the identification of tax evasion schemes with tax-loss estimated at Sh259 billion. There will be further investigations and legal action for non-compliance,” he said.
aolingo@ke.nationmedia.com
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