Tax cheats face asset auction in KRA order

The Kenya Revenue Authority (KRA) has hired a team of auctioneers to help it track properties of individuals and companies who have failed to pay the tax due.

The taxman told Parliament Monday that the property auctions will help clear mounting tax arrears — which stood at Sh192 billion in June 2017.

Cars, land, homes, office blocks and work place equipment will be on the KRA radar at a time when the taxman has stepped up the war against tax cheats.

“We have a team of auctioneers that will help us auction properties and recover any tax arrears that has not been paid,” Edward Mbugua, the KRA deputy commissioner for domestic taxes told the National Assembly’s Public Accounts Committee (PAC).

Individuals and companies targeted are those that have lost disputes against the KRA in court or at the tax tribunal.

The taxman has also set sights on prosecuting up to 600 tax cheats by June next year in an ambitious crackdown targeting to draw in Sh15 billion in revenue.

Some 50 police officers from the Directorate of Criminal Investigations (DCI) have been seconded to the KRA to up investigations into tax defaults.

This will mark a shift from revenue recovery to prosecution, buoyed by intelligence gathering on tax cheats.

Revenue collections will be limited to plea-bargain — where an accused agrees to plead guilty in return for some concessions in courts.

“We have undertaken collection on distress, put caveats on debtors’ property on request by the commissioner domestic taxes and waivers of interest and penalties,” Mr Mbugua said.

“KRA and National Treasury can also waive interest and penalties. There is also write-offs or abandonment of irrecoverable taxes due to various reasons.”

Treasury PS Julius Muia told MPs that the uncollected taxes had increased from Sh98 billion in 2013/14 financial year to Sh192 billion in the 2016/17 financial year.

“The arrears have doubled and this is something that is worrying us. Part of the tax arrears automatically increases if not paid. The arrears attract a two per cent penalty every month that is not paid,” Dr Muia told the committee.

Appearing before MPs to respond to audit queries, Dr Muia told PAC that the Treasury is in talks with the KRA to ensure that the arrears are collected.

Nearly half or Sh90 billion of the Sh192 billion tax are penalties and interest accumulated over the years. Out of the total tax arrears, Sh158 billion remains uncollected in pay-as-you-earn.

Mr Mbugua said Sh4 billion of the tax arrears date back to 1992 and prior years.

“Some of these tax arrears are more than 20 years old and continue accumulating interest. About Sh8.9 billion is locked up in courts, tax appeals tribunal and alternative dispute resolution mechanisms,” Mr Mbugua said. “We propose to write off most of these debts.”