Audit of KRA fat cats ropes in anti-graft czar, NIS

A special committee will be set up to conduct a lifestyle audit of Kenya Revenue Authority (KRA) managers as the government moves to clean up the agency.

KRA Commissioner General John Njiraini(right) commissioner of Domestic taxes Department Alice Owour during a standard Gauge Railway Sensitization at times tower on 4/2/15-BEVERLYNE MUSILI

Treasury Secretary Henry Rotich revealed that the committee would be led by KRA board and will work closely with officials of the Ethics and Anti-Corruption Commission (EACC) and the National Intelligence Service. The exercise is creating some tensions. 

An employee at KRA told Weekend Business that there are cases of employees who bribed their managers to get promotions. Others pushed to be posted in departments where they could extort big bribes. “There is still tension. We were told that the exercises will be carried out selectively  and not every employee will be involved. I think they will be narrowing down on some specific individuals,” the source said.

But our source argued that unless the exercise was conducted with utmost professionalism, it might end up discouraging some employees, which will have some impact on tax collections. The integrity of KRA officials has come into focus over the years with increasing cases of  officers missing revenue collection targets, and this has hurt the implementation of key development projects.

Already the taxman missed its half -year tax collection targets. Treasury recently reported that by the end of December 2015, the total cumulative revenue, including Appropriations-In-Aid (AIA), amounted to Sh575.2 billion against a target of Sh642.9 billion, implying a total shortfall of Sh67.7 billion.

The audit targets rogue employees whose actions have led to loss of State revenue. The exercise is aimed at weeding out fraudsters and errant tax collectors in the authority.

The tax gaps have seen the government turn to borrowing, at times to the detriment of the economy. The lifestyle audit is expected to look at allegations that some KRA employees have been cutting deals with defaulting taxpayers to clean their records.

The ill-gotten cash has been invested in the real estate sector, with some putting up rental houses. For years, working at the agency has been a dream job for the ‘get rich quick’ schemers who use the resources at their disposal to divert what would have been taxes to the state into their own pockets.

“We have agreed on an internal vetting process with KRA which has been setting up the systems to carry out the exercise,” Rotich said but did not state when the actual vetting would take place.

Rotich had earlier said that his office would also establish a hotline that Kenyans can use to pass on tax-related information to the authorities. In a separate interview with The Standard on Sunday, the KRA Commissioner General John Njiraini said that the exercise would be conducted in a manner that will not disrupt the normal operations at the tax agency.

“We will not stop our normal activities for the exercise because we must also ensure that we collect the taxes as required and we cannot tell the government that the reason why we have not met our targets was because of the audit,” Njiraini said.

Some employees have also been accused of frustrating efforts to automate operations of the agency in an effort to keep running cartels that mint millions from the weak systems at the agency. Njiraini said the agency was relying on the ongoing automation of processes to reduce corruption among its staff.

Spy on Mastermind

Key decisions such as those touching on valuation for customs had been left to staff members, opening windows for corrupt practices. The taxman has also been installing a secure intelligence gathering system for use by the public and taxpayers to report corruption and tax evasion.

President Uhuru Kenyatta set the ground for the audit in October last year when he instructed the National Treasury and the KRA to speed up the formulation of a vetting plan, saying the integrity of the agency’s officials was crucial to ensuring all eligible taxpayers met their obligations and paid in the correct amounts.

“Measures geared towards eradicating corruption in tax collection must be implemented. Towards this end, I am directing the National Treasury to work with the KRA board to ensure speedy implementation of an appropriate staff vetting framework,” President Kenyatta said.

This comes weeks after the British Broadcasting Corporation (BBC), in its investigative show Panorama, reported that BAT executives paid bribes to KRA officials to spy on Mastermind Tobacco — the manufacturer of Supermatch cigarettes — and hand over tax files.

The exposé claimed that KRA officials were also paid to make numerous tax demands from Mastermind, a strategy whose aim was to intimidate and damage the reputation of the Kenyan firm. Some KRA officials also demand bribes so as not to report businesses that fail to use an ETR machine to receipt customers.

Other changes on the cards include the introduction of large cargo scanners at the Port of Mombasa that are expected to improve customs capacity to inspect cargo, without physically stripping of containers. KRA is also introducing new administrative measures to improve tax collection, including a deeper surveillance of container freight stations (CFS). The taxman will thus monitor goods moving in and out of such facilities to avoid leakages.

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