KRA regains powers to raid premises and seize property

The Court of Appeal has restored a section of law that gives the Kenya Revenue Authority (KRA) powers to attach property and seize documents of suspected tax cheats.

A Bench of three judges agreed with KRA that the sections of the Tax Procedures Act, which were nullified two years ago, should be subjected to a second opinion before the law is amended.

The judges, however, barred KRA from arresting Dr Robert Ayisi, a former Nairobi County secretary for failing to furnish its officers with documents they had requested.

In May 2018, Justice George Odunga declared sections 44(1) and (2), 60(10 and (3) and 59(4) of Tax procedures Act, 2015, unconstitutional saying it violated of Article 31 (b) of Constitution, “which guarantees people’s right not to have their possessions seized.” Justice Odunga also declared unconstitutional sections of the law that sought to waive the rights of individuals or organisations that are bound by contractual duty of confidentiality

The three sections declared unconstitutional are key anchors of the Tax Procedures Act that gave the KRA power of search and seizure, as well as admissibility of evidence. Section 44 (1) and (2) applies to seizure of goods whose owner the commissioner or authorised officer believes has not paid or will not pay value added tax or excise duty.

The section further empowered the KRA to seize excisable goods that have been moved, altered without permission of the commissioner and those goods whose owners make or produce false declaration or have unlawfully obtained excise duty refund.

Section 60(1) empowered the KRA to have full access to a premise, documents and data storage for the purpose of administering a tax law. Section 60(3) empowered the taxman, while exercising the power of search, to extract copies of documents, seize any documents or storage device and require the owner of such documents or their representative to answer questions. Other than quashing the said sections, Justice Odunga also directed KRA to pay Dr Ayisi Sh2 million for infringing on his rights.

But KRA appealed against the decision saying the ruling had crippled its mandate and reaching projected revenue targets might be difficult.

“From our own analysis of the matter and as demonstrated above, this is a unique case that has public interest bearing on the mandate of the applicant as a tax collection agency on behalf of the people of Kenya,” Justice Martha Koome, Fatuma Sichale and Jamila Mohammed said.

In the case, the court heard that the County government procured legal services from Prof Tom Ojienda & Associates who billed 92.8 million. The firm sued the county government in 2015 for non-payment of legal fees amounting to Sh724,197,078. Thereafter the county wired Sh280 million into Prof Ojienda’s personal account.

The move prompted tax officers to write to the county government requesting copies of fee notes, details of bank accounts, operated by the county so as to ascertain transactions in respect to the public funds and taxes payable to the law firm.

Dr Ayisi allegedly refused to cooperate, forcing KRA to cause his arrest but he was released on intervention of his lawyer and promised to provide the documents in 10 days. He later filed a case challenging the request.

KRA argued that it had the power of requesting for documents and to enforce the tax laws, which cuts across many jurisdictions and authorities. And by quashing the laws, the Judge had crippled its mandate.

The taxman had at the time said Prof Ojienda was under investigation for under-declaring his income for purposes of taxation. But Dr Ayisi argued that the demanded by KRA were carted away by Ethics and Anti-Corruption Commission (EACC) detectives and were yet to be returned to City Hall, hence he was unable to produce them.