Economy

Taxman probes 77 firms in Kemsa scam for tax evasion

MBURU-KRA

KRA Commissioner General Githii Mburu. FILE PHOTO | NMG

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Summary

  • About three quarters or 77 companies that supplied Covid-19 related items to the Kenya Medical Supplies Authority (Kemsa) are under the radar of the taxman after they failed to declare sales and pay taxes as required under law.
  • Kenya Revenue Authority (KRA) Commissioner General Githii Mburu told Parliament that investigations had been launched to establish why the firms failed to disclose and pay domestic taxes.
  • Mr Mburu could not disclose the amount of tax the companies may have evaded since the firms have not filed self-assessment, meaning taxpayers may have lost billions of shillings in unpaid tax.

About three quarters or 77 companies that supplied Covid-19 related items to the Kenya Medical Supplies Authority (Kemsa) are under the radar of the taxman after they failed to declare sales and pay taxes as required under law.

Kenya Revenue Authority (KRA) Commissioner General Githii Mburu told Parliament that investigations had been launched to establish why the firms failed to disclose and pay domestic taxes.

Mr Mburu could not disclose the amount of tax the companies may have evaded since the firms have not filed self-assessment, meaning taxpayers may have lost billions of shillings in unpaid tax.

Kemsa entered into contracts with 102 local firms to supply Covid-19 related items valued Sh7.8 billion. The authority has since paid out Sh4 billion to suppliers of personal protective equipment (PPE).

“Seventy seven companies did not declare any supplies to Kemsa. KRA is currently conducting reviews on the companies to establish compliance status,” Mr Mburu told MPs.

Mr Mburu appeared before National Assembly’s Public Investments Committee (PIC) to provide information on a special audit report on utilisation of the Covid-19 procurement billions.

He said KRA had taken proactive measures to look into payment of taxes by 102 companies that did business with Kemsa between March and June 2020.

“We have deployed comprehensive audits, compliance checks and tax intelligence reviews to ensure integrity and fairness is infused into how companies handled their tax administration matters,” he said.

Data tabled by Mr Mburu shows that out of the 102 firms, only 15 companies’ declared supplies to Kemsa under general Value Added Tax (VAT) rate and paid respective VAT totalling Sh191 million.

Eight declared supplies to Kemsa under the exempt supplies (not subject to tax) worth Sh749,000.

Mr Mburu disclosed that 43 companies made importations for Covid-19 related materials as per the World Health Organisation list of Covid-19 supplies worth Sh1.9 billion and paid Sh324 million as total taxes.