The Kenya Revenue Authority (KRA) has started the process of attaching properties, salaries and bank accounts of high profile tax cheats in what promises to be the boldest crackdown on high net worth persons.
The taxman has compiled a list of companies and wealthy individuals labelled as high risk tax debtors and is seeking to recover Sh20 billion through assets and income seizure.
KRA has hinged this aggressive pursuit of tax cheats on the Tax Procedures Act, which empowers the authority to seek taxes directly from third parties like banks, employers and suppliers as well as seize and auction property to recover unpaid tax.
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.
KRA Commissioner for Domestic Taxes Department Elizabeth Meyo said those classified as high risk debtors have ignored tax payment plans. "Enforcement measures include attachments and caveating property, issuance of agency notices to third parties including banks to recover debts owed," said Ms Meyo on a Friday,
"This will cover hardcore debtors all over the country. Between now and end of the financial year, KRA expects to recover at least Sh20 billion through this initiative," she added while refusing to disclose the number of people targeted.
The move follows months of investigations of rich people’s sources of income and their expenditure against their tax remittances.
KRA has also been analysing companies’ financial dealings, especially firms doing business with the national government and counties, to unearth tax cheats by matching their payments and income declared to KRA.
"These taxpayers are now known to KRA and have been duly contacted and notified of the tax due," say Ms Meso.
Those in employment and have not been declaring income from other ventures like consultancy work or rental income risk having a share of their income deducted from the payroll and remitted to KRA.
The Tax Procedures Act empowers KRA to order employers to deduct the penalties and tax dues from worker’s salaries.
"Under subsection (2) requires an agent to deduct a specified amount from a payment of a salary, wages or other similar remuneration payable at fixed intervals to the taxpayer," says the Act.
"The amount required to be deducted by an agent from each payment shall not exceed twenty percent of the amount of each payment of salary, wages or other remuneration (after the payment of income tax)."
The law, which grants the taxman unfettered powers, provides KRA with powers to freeze tax cheats’ property transactions and ultimately auction them to recover unpaid tax.
"The commissioner or authorised officer may sell forfeited goods in the manner specified in section 41(6) and apply the proceeds of the sale of the forfeited goods in the following order— towards the cost of taking, keeping, and selling the forfeited goods; towards the payment of tax… and the remainder of the proceeds, if any, shall be retained by the commissioner," says the Tax Procedures Act.
The crackdown follows an order from President Uhuru Kenyatta in November last year for KRA to keep a watch on high net-worth individuals whose lifestyles are not in tandem with the taxes they pay.
So far, big names like tycoon Humphrey Kariuki and owners of Keroche Breweries -- Tabitha Karanja and her husband Joseph Karanja — have been charged in court, where they are facing accusations relating to alleged non-payment of taxes running into tens of billions of shillings.
The KRA enforcement unit has been using various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority (KCCA), which reveals individuals who own assets such as helicopters.
Car registration details are also being used to smoke out individuals who are driving high-end vehicles but have little to show in terms of taxes remitted.
Kenya Power meter registrations are helping the taxman to identify landlords, some of who have been slapped with huge tax demands.
The taxman is racing to bring more people into the tax bracket and curb tax cheats and evasion in the quest to meet revenue targets that it has persistently missed in recent years.
KRA missed its collection target by Sh60.2 billion in the three months to September due to sluggish corporate earnings, reduced economic activity and a freeze in hiring amid job cuts.
Internal revenues from items like fines, payments for passports and marriage fees were below target by Sh24.4 billion.
This has left the KRA and the Treasury under huge pressure to widen the tax net and clamp down on cheats amid growing expenditure needs, especially from county governments.
The authority has hired a team of auctioneers to help it track properties of individuals and companies who have failed to pay the tax due.