The taxman has uncovered a web of tax evasion schemes running over nine years that will see thousands of businesses face demands for unremitted dues projected to run into billions of shillings.
The Kenya Revenue Authority (KRA) said it had unearthed cases where firms issued fictitious invoices without supplying goods or services to evade paying their pound of flesh.
“KRA would like to inform the general public that there are taxpayers who are issuing fictitious invoices that are not supported by any supply of goods or services. The intention thereof is to evade tax,” the authority said.
“Section 17(2) (b) of the VAT Act provides that the deduction for input tax shall not be allowed where there is no corresponding sales declaration by suppliers,” KRA said.
To curb the practice, KRA said, it has automated its Value Added Tax (VAT) filing system to lock out any invoices made without corresponding sales documents.
Corresponding sales
“In light of this, KRA wishes to notify VAT registered persons of the changes made in the VAT Return filing process. The changes involve automated disallowance of input VAT at the time of filing returns from identified suppliers who have not declared corresponding sales for the inputs being claimed, with effect from the filing of August 1, 2013,” it said.
VAT is a consumer tax charged on the supply of taxable goods and services made in Kenya and importation of taxable goods or services made into Kenya.
All traders with a turnover of taxable supplies of Sh5 million per year and above should register for VAT. Voluntary registration is allowed for traders with taxable supplies below the Sh5 million threshold.
A supplier registered for VAT is mandated to file a return by the 20th of the month following making of the supply. A return must be filed by a registered person irrespective of whether there is a sale or not.
KRA said the cases have been traced back to 2013 and that all “the affected taxpayers will be notified electronically of the input tax disallowed.”
This is likely to lead to a situation where businesses will be faced with tax demands running into billions of shillings, as the taxman keeps up with the pressure to collect more revenues and net tax evaders.
High-tech surveillance
In the financial year 2021/22, KRA crossed the Sh2 trillion revenue collection mark for the first time in history, after employing measures, including acquisition of high-tech surveillance equipment and a voluntary tax disclosure programme that roped in over 17,000 taxpayers who had not remitted Sh8.5 billion in tax liabilities.
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