A tax dispute between the Kenya Revenue Authority (KRA) and the Kenya Forest Service (KFS) has left the latter’s more than 5,000 employees without their March salaries.
The taxman froze the KFS bank account on March 21 , crippling it financially and leaving it unable to pay salaries.
Although the freeze was lifted on Friday, staff have not received their pay to date.
A KFS official told the Business Daily that the dispute arose from a Sh1.3 billion demand by the KRA for taxes allegedly accrued from the sale of saw logs. This resulted in the freezing of the State agency’s account at KCB Bank.
KFS staff traditionally receive their salaries from the 24th day of every new month but KFS hasn’t processed workers’ salaries since March, leaving its workforce in distress.
“It has been disastrous going without pay for close to two months now. Our accounts were frozen as a result of Sh1.3 billion that has not been remitted to KRA from the sale of saw logs,” said a KFS official who sought anonymity.
In a memo to employees on April 8, acting Chief Conservator of Forests Monica Kalenda said that they were working towards resolving the issue of the delayed salaries.
“You may be aware of the delayed salaries for the month of March 2019. We want to reassure all the staff that we are doing everything possible to have the salaries paid into your accounts as soon as possible. Any inconveniences are regretted,” said Ms Kalenda.
And in a letter addressed to the legal department of KCB Bank dated April 12, KRA however indicated that it had resolved the dispute with KFS and directed the bank to lift its initial freeze directive.
“Reference is made to our agency notice dated March 21, 2019 and subsequent agreement with the National Treasury on the debt. Kindly treat our agency notice on the accounts of the above mentioned taxpayer as cancelled,” said Asha K Salim, the debt enforcement manager at KRA.
Sale of logs
KFS has been relying on the sale of logs to boost its revenues. However, this revenue stream was hit last year after a moratorium placed on logging, affecting the agency’s financial position.
The agency was earning more than Sh2 billion annually from the sale of saw logs, which kept it financially sound.
Last year, the Director of Public Prosecution ordered investigations into the loss of Sh1.2 billion in fraudulent dealings between KFS officials and sawmillers.
Mr Noordin Haji asked the Directorate of Criminal Investigations to commence the investigation on transactions conducted between the 2012/13 and 2017/18 financial years.
The amount is owed to KFS by sawmillers for forest plantation material harvested between 2012 and 2018.
In a letter to the DPP, Environment Secretary Keriako Tobiko noted that before forest plantation material is allocated to sawmillers for harvesting, payment of the assessed value must be made in full.
“It would therefore be necessary to investigate and determine whether the accumulated debt was as a result of collusion and conspiracy between relevant KFS officials and the sawmillers in question to defraud the KFS,” said Mr Tobiko in a letter dated November 9.
“I write therefore to kindly request you, in exercise of your constitutional and legal powers, to direct relevant criminal investigative agencies to conduct investigations into the matters raised,” he wrote.