The Kenya Revenue Authority (KRA) has now set its sights on governors in a bid to recover billions of shillings in unpaid taxes.
At least 10 governors are among 600 individuals being targeted for alleged tax evasion, which is estimated to have cost the economy about Sh250 billion.
The agency has already written to several county bosses demanding immediate payment of accrued taxes, failure to which they will be prosecuted.
Some of the county chiefs face personal tax bills as they own businesses generating millions of shillings annually, but they regularly file nil returns.
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While the amount owed by the governors was not immediately available, those targeted have been summoned to explain how and why they failed to pay taxes.
Others have failed to file tax returns as required by law, while a few are said to be living beyond their means.
“One governor was the other day saying how wealthy he is and that he owns a lot of property in the city, but he has not filed any returns,” said a senior official aware of the probe.
Yesterday, a governor from northern Kenya spent hours pleading his case at Times Towers. Three other first-time governors have already appeared before the taxman.
KRA has also established a special desk at its Upper Hill officers to grill the targeted persons.
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One governor who runs a media house was summoned and grilled over failure to file proper returns. The governor promised to pay the Sh5 million the taxman is demanding.
A total of 17 county governments and assemblies owe taxes amounting to Sh5.6 billion. This includes Sh2.3 billion for Pay As You Earn (PAYE), Sh1.2 billion withholding VAT and Sh2 billion in other taxes.
More than half of these taxes are owed by Nairobi County.
Almost all counties have been deducting PAYE from their workers’ salaries but fail to remit this to KRA as required by law. This, KRA says, is criminal and it wants to hold the county chiefs personally liable.
The counties are also under scrutiny for failing to remit billions of shillings in withholding tax or withholding VAT from suppliers.
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The taxman accuses some of the devolved units of doing business with shady firms whose tax details are not in its system, hence it has slapped those affected with a corporation tax.
Yesterday, KRA Commissioner for Domestic Taxes Elizabeth Meyo warned that governors face prosecution if they fail to comply with the agency’s demands.
“County chiefs should ensure that they have paid personal taxes from their incomes,” said Ms Meyo. “We are appealing to governors that if they have other businesses, they should file their returns or else we will come for them.”
Council of Governors (CoG) Chairman Wycliffe Oparanya said he met tax officials last week and they agreed to hold another meeting with all governors.
“The KRA team met me in my capacity as CoG chairman and briefed me about the tax demands. Ms Meyo, who is in charge of domestic taxes, led the team,” Mr Oparanya said.
Oparanya agreed that counties owe KRA billions of shillings in remittances, which he blamed on transitions during the budgeting process and delays by the Treasury to disburse funds.
“Maybe some governors are not aware of other tax obligations and that is why KRA agreed to meet the whole team. Equally, the commission is setting up an office in Westlands where a manager will be stationed to help governors understand their obligations.”
KRA said it is pursuing those who have deliberately chosen to evade taxes through various practices, including failure to fully disclose income or mis-statement of expenses to reduce the taxable income.
The taxman is also targeting individuals or businesses that have failed to pay the correct import taxes through concealment of goods, mis-declarations and undervaluation, among other schemes.
“Counties should ensure that they deal with tax-complaint firms. Counties will be issued with agency notices to pay taxes to KRA. This is not limited to counties but to all Government departments and parastatals,” Meyo said.
Apart from the threat of prosecution, KRA has indicated that, in accordance to the law, it will attach accounts of counties to recover monies owed.
A media personality, according to insiders, was slapped with a Sh10 million tax demand for failing to file returns for his businesses. And on Tuesday, KRA officers raided the Nairobi home of a businessman in an alleged Sh1 billion tax evasion scheme.
KRA has been experiencing difficulties meeting revenue targets set by the Treasury. For instance, in the last financial year, it collected Sh1.44 trillion, which was Sh100 billion more than the previous year, but fell short of its Sh1.5 trillion target.
And to put pressure on tax evaders, KRA plans to expose individuals who have wealth that is inconsistent with their known sources of income, and share the information with the Asset Recovery Agency and the Ethics and Anti-Corruption Commission for appropriate action.