Turf wars between the Kenya Revenue Authority (KRA) and clearing agents has seen huge revenue losses in the last two years.
This is according to an umbrella body for clearing and forwarding agents - the Kenya International Freight and Warehousing Association (Kifwa).
The lobby says say KRA’s war on cargo agents has now escalated to another level.
Prior to the turf wars, KRA had announced stringent compliance rules that would, among other measures, require the agents to file bio-data forms where they would disclose detailed information about financial positions of their businesses, and their dealings with clients.
KRA had earlier given a long tirade accusing the agents of abetting drug trafficking at the entry ports and being purveyors of the rampant corruption at the country’s entry points, which led to millions of shilling in losses of tax revenue.
KRA Commissioner General John Njiraini asserted that the strict rules would curb the vices associated with the cargo agents. “The agents must be vetted to ascertain their suitability, combat fraud, as well as ensure they conform to tax requirements,” Njiraini said.
“Given the importance of clearing and forwarding services in safeguarding national security and public revenue, it is imperative that persons entrusted with this role exhibit the highest standards of ethical and business conduct. There will be no license renewal without the vetting,” he added. But two years down the line, the stand-off between the taxman and the agents remains eerily salient with none of the two antagonists blinking.
The result is a noted loss of revenue on the taxman’s side, and loss of business by the agents which has seen many close shop and a rise in job losses in the sub-sector.
According to documents from Kifwa, KRA collected Sh3 billion in taxes from the agents prior to the turf wars between the two antagonists - a claim KRA refutes.
By April last year, there were 1,200 cargo agents but Kifwa Chairman William Ojonyo says some have been forced to scale down their businesses, which has resulted to lower tax collections by KRA annually.
The taxman however says its revenue collection has gone up, according to the KRA Commissioner for Customs Julius Musyoki.
He did not however give further details.
Mr Ojonyo who was recently elected by the agents after a bitter infighting within the Kifwa ranks, said the agents have been hugely demotivated because they cannot bid for tenders in the absence of having a licence. The last two years has seen many of them not licensed because of not meeting KRA’s rules.
“When we bid for a tender, it is imperative to include the licence with the rest of the tender documents. Licenses that we don’t have,” Ojonyo explained.
Last year, the battle between the agents and KRA moved to the courts after both parties failed to agree on a deal brokered by the Treasury.
The legal platform did little to help the grave situation. “The matter went before the courts but now it is in abeyance,” Ojonyo told the Financial Standard.
What was left was for KRA and the agents to find a way of settling out of court to remove the gridlock that was financially hurting both parties.
KRA Commissioner for Customs Julius Musyoki however denied having any problem between the taxman and the agents.
Musyoki said KRA was ready to issue them with licences after the completion of the ongoing vetting exercise.
“During the renewal period for the year 2017 which kicked off in the last quarter of 2016, top management of KRA insisted that all agents must be vetted to ensure the agents were of high integrity and complied with other tax obligation,” explained Musyoki. “Renewal of Licences for 2017 went on concurrently with the vetting. This culminated in the renewal of licenses for 868 customs agents by December 31, 2017.”
Mr Musyoki said that the renewal of licences for the 868 agents who successfully went through the vetting exercise are eligible for renewal this year.
“The process started on March 16th after the authority published a notice in the print media listing the 868 agents and inviting them to apply for renewal,” he said.
Of the 1200 agents, only 337 have not been issued with licenses by KRA. This represents a mere 28 per cent of Kifwa’s membership.
It is surprising that even as Ojonyo insists on the antagonism with KRA, majority of the agents have been accredited. According to KRA, agents engaged in work while not having proper licence, are doing it illegally.
Mr Ojonyo, however, alleges that KRA divided Kifwa into factions fighting each other and only supported faction that agreed with its rules.
He claimed that the big faction that supports KRA’s rules comprise of big foreign agents. “The whole infighting among the agents had been brought about by KRA after it published a list of agents that it had vetted.” He noted that as long as KRA refuses to involve them in the vetting process, they will not agree to its demands.
Musyoki says the court matter was between a faction of the association which did not agree with the rules.
“This faction was led by individuals who were not bona fide officials of Kifwa,” claimed Musyoki.