Economy

KRA to probe Tatu City over tax evasion

kra

KRA commissioner -general John Njiraini. FILE PHOTO | NMG

The controversy surrounding Tatu City, the multi-billion shilling real estate project on the outskirts of Nairobi, deepened Tuesday after the Kenya Revenue Authority (KRA) said it will put caveats on the company’s land transactions as it opens fresh investigations into alleged tax evasion.

KRA commissioner-general John Njiraini told Parliament that he has powers under the law to put caveats or restrict transfer of Tatu City land.

“Yes we have power to put caveats or restrict transfer on the property. We will consider that because we have power to do that as we investigate this matter,” Mr Njiraini told the National Assembly’s Lands committee.

Cherangany MP Joshua Kutuny had sought to know if KRA can in public interest, put caveats on all Tatu City and Kofinaf properties until it concludes investigations into claims of tax evasion.

Mr Njiraini asked for two weeks to look at the issue afresh saying a multi-agency team that brings together the directorate of criminal investigations (DCI), Ethics and Anti-Corruption Commission (EACC), the Director of Public Prosecutions (DPP) and the Attorney General has been investigating several cases of tax evasion, including that of Tatu City and Kofinaf Company Limited, and he would want to look at their findings.

“Because I know work has been going on under Multi Agency Team (MAT), I want to bring that information here. My officers had no sight of this because I have not been there,” Mr Njiraini (above) told the committee chaired by Kitui South MP Rachael Nyamai.

The committee is investigating Tatu City’s dealings following a petition filed by 1,300 residents of Kiambu County. Parliament is also probing allegations of tax evasion after Tatu City chairman Nahashon Nyagah and minority shareholder Stephen Mwagiru tabled documents showing that foreign directors may have irregularly repatriated more than Sh6.5 billion.

In August, Mr Nyagah tabled two letters he and Bidco Oil chairman Vamal Shah (who is a shareholder in Tatu City) wrote to the DCI on February 6, 2017 asking for investigations into the theft of Tatu City and Kofinaf money.

In the letters, Mr Nyagah and Mr Shah claimed that their foreign partners Stephen Armstrong Jennings, Frances Holiday, Hans Jochum Horn, Frank Mosier, Christopher John Barron, Andrew Rowell and Pius Mbugua Ngugi, a Kenyan, had not accounted for $51,522,175 (Sh5.15 billion).

Mr Nyagah told the committee that he had brought to the attention of the DCI the fact that the majority foreign directors had not accounted for $13,540,003 (Sh1.35 billion) in respect of excess amounts paid for acquisition of loans to purchase the Kofinaf land.

Yesterday, the acting commissioner domestic tax department Ruth Wachira told MPs that the Kenyan tax system is based on self-assessment and taxpayers are required to asses themselves and pay any taxes payable within the stipulated timelines.

“KRA can then conduct compliance checks and in-depth audits to determine the accuracy of the self-assessment,” she said.

Dr Wachira said Tatu City Limited had paid a total of Sh186 million in corporation tax, PAYE and value added tax (VAT) from 2015 to 2018. The company declared loses in 2011, 2012, 2013, 2014 and 2016, according to KRA documents.

Kofinaf Company Limited on the other hand paid a total of Sh426,499,302 between 2012 to 2016 and declared loses in 2017 and 2018. The company did not pay any PAYE and VAT from 2012 to 2014. It started paying VAT for 2017 and 2018.

KRA said it issued an in depth audit notice of assessment letter to Tatu City on July 15, 2015 for which taxes amounting to Sh42,414,030 were payable.

Dr Wachira told MPs that KRA also issued an in-depth audit notice of additional assessment letter to Kofinaf on January 16, 2016 for which Sh275,424,772 was payable.

On the issue of undervaluing land in order to pay less stamp duty, KRA said the Ministry of Land is responsible for valuation and stamp duty assessment and that it only acts as a collecting agent based on the values assessed.

“KRA has scheduled taxpayers (Tatu City and Kofinaf Company) for comprehensive tax audit to be done in January 2019,” Dr Wachira said.

Mr Njiraini said it is normal practice that when there is an allegation of tax evasion, KRA investigates. Give me two weeks to confirm status of tax investigations by multi-agency taskforce. This now opens up investigations from the enforcement team.

“We have no sight of the sworn affidavits before you. We will be very happy to get that information and quickly take action,” Mr Njiraini said. He was allowed two week to conduct investigations and report findings.