ARINSA news postings

Two Suspects Charged for Ksh 7 billion Tax Evasion

Picture of Peter Igesha
Two Suspects Charged for Ksh 7 billion Tax Evasion
by Peter Igesha - Thursday, 5 April 2018, 4:21 PM

The Kenya Revenue Authority (KRA) has today charged two suspects at the Makadara Chief Magistrates Court for tax evasion amounting to Ksh 7,069,975,452. The two, Mr Kevalkumar Navin Maisura and Ms. Arti Jagdiesh Bakrania (alias Ms. Arti Kevalkumar Maisura), were arrested after it was found out that they have registered more than nine business names and are believed to have made fictitious invoicing in excess of Ksh15,369,511,856. They are suspected to have defrauded or aided in defrauding the government approximately Ksh 2,459,121,896 in Value Added Tax and a further Ksh 4,610,853,556.80 in income taxes. Officers from KRA’s Investigations and Enforcement Department conducted a search on the residential premises of the two suspects on 4th April, 2018, and confiscated crucial documents and electronic devices including ten ETR machines. The suspects have been under surveillance for sometime. 

If found guilty by the court, the suspects will serve a jail term of up to 10 years imprisonment or a fine of double the taxes evaded.

The scheme

This case is part of an elaborate tax fraud scheme that KRA has been investigating for over one year. It involves some traders who have been claiming fraudulent purchases thereby evading payments of billions of shillings in taxes. A group of individuals who register several business names for fictitious invoicing perpetuates the scheme similar to the “missing trader” scheme in India and Europe.

In the scheme, fictitious invoices are generated to depict a business transaction whereas there is no actual supply or movement of goods and services. The invoices are generated and sold at a fee by the missing traders to existing companies purposely for use in inflating the cost of sales thereby reducing tax payable.

The major companies that have benefited from the missing traders syndicate are in various sectors including: construction, importers of hardware and household goods, scrap metal dealers and importers of electronic items including mobile phones.

Some of the companies import goods but under-declare the imports in order to pay less import duty and VAT. In order to claim Input VAT the companies’ then resort to buying invoices to inflate purchases, making purchases almost equal to sales thereby resulting into minimal VAT being paid.

Initial findings reveal that the government lost in excess of Ksh7 billion in terms of VAT alone over the last three years.

Next course of action

KRA is investigating approximately 66 missing traders and over 2,000 beneficiaries of the scheme. Investigations have been extended to those taxpayers who benefitted from the scheme, and taxes lost recovered through the relevant provisions of the tax laws. Prosecution of culpable individuals will also continue.

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Picture of Kudzai Chinoda
Re: Two Suspects Charged for Ksh 7 billion Tax Evasion
by Kudzai Chinoda - Monday, 9 April 2018, 2:08 PM

Interesting article that should raise awareness for other colleagues in the region. This was a very common fraud in the European Union. There is really nothing new under the sun.

Thanks Peter for sharing!

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