The Kenya Revenue Authority (KRA) dragnet has recovered Sh330 million in taxes from suppliers trading with county governments.
The millions, the taxman said, were netted over a period of three years following investigations on tax evasion by traders transacting with the devolved units.
KRA Commissioner for Investigations and Enforcement David Yego said the taxes comprise value added tax (VAT), income and withholding taxes.
“Kenya Revenue Authority has in the past three years received intelligence reports of tax evasion by various business entities trading with county governments. We are confident that additional taxes shall be recovered from these suppliers,” said Mr Yego.
During the investigations, he said, KRA established that tax evasion by county suppliers is done through use of fictitious invoices to inflate costs and failure by the county governments to remit taxes withheld from the suppliers and employees.
This is in addition to other non-compliance issues like failure to file returns and filing of nil returns even after entities earn taxable income, a matter Mr Yego said is still under investigation.
“Over the investigative period, KRA carried out risk analysis and established that despite the increase in expenditure by the county governments on supplies of goods and services, there was no corresponding increase in tax payments by the suppliers in terms of income tax, valued added tax and withholding taxes,” he said.
Mr Yego noted that some suppliers agreed to pay taxes due while others have been charged in court.
Others, however, have opted to seek redress at the Tax Appeals Tribunal and while some have since engaged the taxman with the aim of settling the cases amicably as per the provisions of the Tax and Customs Laws.
Mr Yego urged suppliers to take advantage of the amnesty window as provided as provided under the Finance Act, 2020 before KRA comes after them.
In a bid to improve compliance, the KRA has offered waivers on tax dues accumulated for up to five years. This, it hopes, would entice firms and individuals to voluntarily declare such dues.
Under the voluntary tax disclosure programme, which shall run for three years with effect from January 1, 2021, the Treasury says those who declare pending liability and pay within one year shall enjoy 100 percent interest and penalty waiver.
Mr Yego pointed out that once a supplier is identified for investigation, they will not be allowed to enjoy the advantages provided under the amnesty.
“It is an offence under the Tax Procedures Act to deduct and fail to pay due taxes. The Authority will therefore promptly institute criminal investigations for prosecution where it is established that the county officials have failed in their statutory obligations tax under tax laws,” he said.
The taxman had last year said it had identified the tax cheats as it intensified efforts to nab defaulters in its race against time to stem its perennial missed collection targets.
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