The Kenya Revenue Authority (KRA) has withdrawn a suit it filed against Estama Investments, the company at the centre of Afya House’s Sh1 billion mobile clinics scandal.
The taxman and Estama last week resolved to have the suit withdrawn and instead settle the dispute through the KRA Tribunal after a fresh review of taxes demanded from the company.
The KRA has already slapped Estama Investments with a Sh347 million demand for taxes, and the supplies firm has until April 24, 2017 to file an objection before the tribunal.
After filing the objection, the KRA will have 60 days to respond to the issues raised before the tribunal.
“Pursuant to section 43(7) of the Tax Procedures Act and the notice of assessment (issued to Estama and Business Capital Access), the proceedings be and are hereby stayed and the KRA is to commence proceedings for recovery,” Justice Nzioka said in a court order adopting the withdrawal.
“In the meantime, the applications filed herein and the ruling pending be marked as abandoned.”
KRA reckons that Estama has not paid taxes on the Sh800 million it was paid for supplying mobile clinics to the Ministry of Health, but has since moved some of the money to secret offshore bank accounts.
The taxman alleges that Estama Investments has been suspiciously moving funds received from the controversial Ministry of Health tender without meeting its tax obligations.
Estama has not filed any tax returns nor paid a single cent in taxes since its formation in 2008, KRA says in its petition before the court.
But Estama in its response held that the KRA audited its books of accounts in May last year and only found it to be in arrears of Sh1.1 million that was paid in full. The Sh1.3 million was in respect of VAT and PAYE, Estama Investments said.
Justice Grace Nzioka had declined to issue orders freezing seven bank accounts owned by Estama Investments and its sister company — Business Capital Access — arguing that the taxman was too vague in his court filings.
The company is also accused of overstating its costs while supplying the mobile clinics, a move that significantly reduced its value added tax (VAT) liability.
Estama Investments said in its response to the suit that the Sh350 million moved to offshore bank accounts was for payment of its suppliers—Guangzhou Moneybox Steel Structure Engineering Company Limited.
Information contained in KRA’s digital platform — Simba — indicates that Estama paid Sh1.4 million for each container clinic that it then sold to the Ministry of Health at Sh10 million.
Estama’s questionable dealings with the Ministry of Health were revealed in an internal audit report indicating that the taxpayers may have lost up to Sh5.3 billion in irregular dealings at Afya House.