KRA prepares suit to recover Kingsway taxes

The taxman is now preparing to move to court seeking recovery of revenue from directors of a tyre company that has been at the centre of Parliamentary debate revolving around nomination of Mumo Matemu as Ethics and Anti-Corruption Commission (EACC) head.

A brief seen by the Business Daily shows that Kenya Revenue Authority intends to take action against the directors of Kingsway Tyres and Automart Ltd (KTAL) in criminal proceedings to be followed by civil action.

So far, the taxman says he has thwarted attempts to deregister the firm and charged one of the transferred assets, traced through tax assessments of the beneficiary firm “despite the Registrar General failing to avail details of directors”.

The taxman nevertheless has no illusion about quick recovery of the claims. “It is intended we launch civil litigation against both the directors and the successor company to recover the taxes due from KTAL. This may however have to await the conclusion of criminal proceedings,” says the brief.

The firm ceased trading in the midst of KRA effort to recover slightly over Sh2 billion in taxes. The claims included Sh272.4 million in VAT and almost Sh1.8 billion in corporation tax.

A section of MPs are opposed to Mr Matemu’s nomination over reported failure to collect the said tax. He served KRA as support services commissioner, equivalent to a chief legal officer.

Voting on whether Mr Matemu should chair the anti-graft body or not takes place after reopening of the National Assembly following its decision to adjourn sine die (indefinitely) days ahead of Christmas.

Mr Matemu and two other nominees—Prof Jane Kerubo Onsongo and Ms Irene Cheptoo—were accused by the House Legal Committee of lacking “passion” for the job but Parliament went on reject its report.

Four KRA officials are reliably known to have already recorded statements over the failed tax recovery process which started with a tax assessment in January 2003.

KRA in March 2004 slapped a distress notice on banks to access the firm’s cash but got nothing—after which it appointed the Speedman Commercial Agencies, a debt-collector who barricaded the company premises.

MPs accused the collector of pushing a self-serving agenda by pointing a finger at Mr Matemu after failing to secure fees appertaining to the job.

Kingsway met the then commissioner of Domestic Tax Department Jack Ranguma and agreed to pay Sh1.5 million weekly but soon after secured a restraining order from court after making just one payment in September 2004. No further payment was made, with KRA in May 2007 only managing to lift the order on the ground that the distress had been withdrawn and a payment plan made.

In 2008, KRA through the Domestic Tax Department-Large Tax Payers Office Commissioner John Njiraini who had joined the previous year (and noticed the contradiction of the court order), made fresh demand, but was told the firm ceased trading in 2004.

“The evidence brought to light the possibility of the directors having irregularly transferred the company business to another continuing entity,” says the brief, noting the two companies have two directors in common.

In the meantime, MPs are expected to continue with their debate soon.