Railway firm evaded Sh800m tax, court told

RVR petitioned the court to force the State to refund Sh1.6 billion, money it claims was paid for road maintenance levy. [Courtesy]
The Government might have lost Sh800 million taxes in the deal between Kenya Railways Corporation (KR) and Rift Valley Railways (RVR).

It emerged in court that RVR has unpaid taxes ranging from customs duty, corporate tax and Value Added Tax (VAT).

The allegation that the firm owes Kenya Revenue Authority (KRA) more than Sh800 million is contained in a further reply by KR’s corporation secretary Helen Mungania, who claims RVR had at the time of exit unpaid dues and under-declared income.

“The petitioner engaged in fraudulent practices which included tax evasion. KR is aware that RVR owes the State more than Sh800 million in unpaid taxes,” she said fearing that the tax burden could be shifted to KR.

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The Government’s corporation terminated a 25-year deal two years ago in which RVR had been left to run the old railway system. They had signed a concession agreement on January 23, 2006, but the State Corporation terminated the deal on July 31, 2017.

RVR petitioned the court to force the State to refund Sh1.6 billion, money it claims was paid for road maintenance levy.

But KR, in opposition, says the private transport firm mismanaged its assets.

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RVR equally says it does not owe KRA. According to its chief finance officer Bong Yoon, it will address queries raised by KRA separately.

While denying that tax liability will be passed to KR, Yoon said it was raised in bad faith and was scandalous, defamatory and meant to divert attention on the Sh1.6 billion claim.

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“This court has no jurisdiction to hear and determine tax issues, and raising them in this forum is in bad faith,” claimed Yoon.

In the allegation, KR attached a KRA letter dated April 24, 2017, detailing its investigations on RVR and its subsidiaries.

The letter enumerates that two consignments were cleared without import declaration fees being paid. In this, KRA claims it is owed Sh439,487 million. Another Sh227 million is listed “as tax which had not been perfected” contrary to section 38 of tax law.

KRA also laid a claim on 26 locomotives in which it claimed more than Sh660 million in taxes.

But RVR termed the tabled allegations as wild, maintaining that the KRA demand(s) had no relationship with the case before High Court judge Weldon Korir.

“Instead of providing the alleged World Bank report, the KR relies on a letter from a third party-KRA, which has no connection whatsoever with the initial allegation,” said Yoon. The case will be heard

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Kenya Railways CorporationRift Valley RailwaysKRA