State war on tax cheats nets Sh18.1b in 2 months

Ever Diamond Cargo vessel at the port of Mombasa. [Maarufu Mohamed/Standard]

The Government has launched a fruitful war against tax evaders at the country’s borders, going by latest official data.

Figures from the Central Bank of Kenya (CBK) show import duty in the first two months of the current financial year more than doubled to Sh18.1 billion compared with Sh13 billion collected in the same period last year.

This is the highest increase in recent past. In the last financial year that ended in June 2018, Kenya collected Sh103 billion from customs and other import duties.

The Treasury has projected to collect taxes on imports of about Sh119 billion by the end of the current financial year. Customs duty is levied at rates between zero per cent and 100 per cent, with an average rate of 25 per cent.

There have been fears that the crackdown by the multi-agency committee comprising Kenya Revenue Authority (KRA), Kenya Bureau of Standards (Kebs), Anti-Counterfeit Agency and Kenya Industrial Property, among others, has affected the inflow of goods into the country, with truckloads being confiscated for various violations.

The agency has employed a multi-pronged strategy to deal with illegally imported products, including 100 per cent inspection for verification of consolidated cargo consignments at the port, tightening of operations at border entry points to stop tax evasion and monitor the quality of goods coming into the country.

In April, KRA and Kebs developed a new procedure known as Route D which requires traders who import different products by pooling them into a single consignment to register with the latter agency.

The procedure is aimed at curbing tax evasion and fake products entering the country.

Huge losses

The procedure affects goods brought into the country by both sea and air. All products imported under “Consolidated Cargo” are to be inspected at the country of origin by the standards body under the Pre-Export of Conformity (PVOC) programme. The PVOC programme was developed in 2015. It requires all imported products to be inspected at the country of origin by the standards body.

The new procedure has affected a wide range of products imported as consolidated cargo by several small individual importers.

“This procedure applies to cargo containing a wide range of products or merchandise generally in small quantities or parcels belonging to several consignees who have pooled or assembled together their parcels to form one consignment,” said KRA and Kebs in a joint statement.

The consignment may be declared as belonging to one importer at the port of destination or de-consolidated back into the original individual cargo for delivery to the respective owners upon arrival at destination port.”

There have been heightened protests, with traders saying they have made huge losses as their goods continue being held at the port of Mombasa by the State.

However, KRA has insisted it is the guilty ones that are afraid. “The context in which this issue came up, is that consolidators – allow me to use the word –  were duped by some people who they gave their consignments because these people they gave to clear their consignments for them misdeclared them,” said KRA Commissioner of Customs and Border Control Julius Musyoki.

KRA also recently announced plans to punish individuals who buy goods or services from persons or entities that fail to declare their income in a move aimed at growing tax revenue.

The system, which entails in-depth data analytics, is expected to cure the problem of fictitious value added tax (VAT) inputs mismatched against outputs.