How crafty traders use children and disabled to evade tax at the borders

People in wheelchairs and children wait to offload a lorry with goods at Noman’s land in Busia border. [Jenipher Wachie, Standard]

At about 3am, the whistling of a boy on his way to Busia’s Sofia market disturbs the silence of a breaking dawn.

“I have done this business for two years. Nobody can harm me,” says the 12-year-old.

He is talking about the business of transporting goods from Kenya to Uganda through ‘panya routes’ at the Busia border. He is among a group of children who arrive at the market to pile goods on the carriages constructed at the bottom of wheelchairs belonging to people with disabilities, and push them beyond the borders.

The carriages are meant to carry personal items, but they are used by businessmen to ferry good across the border without paying tax.

The small-scale nature of the operation, combined with the fact that people with disabilities and children are rarely targeted, is allowing the practice to thrive.

Their approach is one of several methods that smugglers are using to evade taxes.

At the market, people paint a grim reality of how law enforcers look aside as sneaky business people exploit the loopholes that still exist at the border, despite the launch of One-Stop Border points.

“People do not pay attention to those in wheelchairs. They think it is rude to keep asking them to open the luggages they are carrying,” says Peter Nanjala who trades at Sofia market.

Richard Kamajugo, a senior director at Trademark East Africa, says even though Immigration officials often turn a blind eye to the activities because the items are transported in small scale, by the end of the day, the impact is bigger than they imagine.

“The reality is that those people in wheelchairs and children can offload a whole truck in a day. And the items are often consolidated at the drop off points by shrewd business people who do not want to pay tax,” Kamajugo says.

Kenya Revenue Authority (KRA) Western Regional Coordinator Joseph Kaguru says sugar is among the most smuggled goods, as it is classified under sensitive items in the East African Community Common Tariff (EAC CET) and thus attracts 100 per cent import duty.

He says other items ferried across the border include cigarettes, eggs, fuel, milk, cosmetics and fish.

At Sofia market, a small group forms by 4.30am.

In one of the shops, a man inside a stall calls one of the children. The child runs towards him and returns with an unmarked box. His back is bent from the weight. He walks towards the people in wheelchairs and dumps the package on the carriage of a rickety wheelchair. Together, they start their weary trudge towards the border post, heading to Uganda.

The man in the wheelchair is David (not his real name). He lost his limbs from a polio attack when he was a little boy. His parents believed he was cursed, so they never took him to school.

“I do this business because I don’t want to beg,” he says as he puffs away.

He never opens the package he is given to deliver. All he knows is that he is paid Sh100 to 300 per trip.

The packages are rarely checked at the border, and when there are issues, David says the Immigration officials always “sort it out” with the owner of the package.

He gets agitated when I press on the meaning of “sort it out”.

“They know each other, so they talk,” he says.

David says on a good day, he can make about 10 trips across the border, carrying boxes to and from Uganda. People familiar with the operations at the market say about 100 wheelchairs make their way across the border every day.

One of the businessmen admits that he prefers to use the children and people with disability to ferry his goods because they offer cheaper labour.

“It is very expensive to get a car to cross the border. The process is also very long. If you are a small scale businessperson, you have to look for other means,” he says.

He is hesitant to reveal how many boxes he transports in a day, and if he ever pays taxes for his goods.

Mastered routine

“You are asking too much. Just know that this is how business is done,” he says.

Across the border in Uganda, as soon as the wheelchairs cross from Kenya, they are met by a group of people ready to receive the goods, pack them in waiting vehicles and drive off. From there, they are distributed to retail shops.

As the goods from Kenya arrive, another team of people in wheelchairs departs from Uganda. Their cycle of crossing the border is a routine they have mastered over the years.

One of the men in wheelchairs explains that there is a bigger group of transporters who do the same work.

“They drive Toyota Probox and are untouchable. They bring in larger boxes than the ones we carry,” he says.

A driver who has been in the business for several years agrees to talk about the people behind the business. He earns a living from helping businessmen evade taxes and has done the job for seven years. Before the interview starts in Busia’s Marachi slum, he requests anonymity.

“If people know that I talked, I am finished,” he says. He reveals that the industry is dominated by politicians, senior police officers and business moguls.

“It is a wide network located in different parts of the country,” he says. He adds that some of the vehicles used for smuggling belong to police officers and top politicians in Kenya and Uganda.

“Sometimes the buyers make orders on the phone and pay using mobile money transfer services. We only come to transport, then we are paid by the owner of the warehouse,” he says.

The warehouses are located in Nalongo in Uganda, less than one kilometre from Kenya’s security strip in Sofia area.

“There are days I carry goods worth Sh2 million or more. I have to drive fast to reach on time and avoid being arrested. The more trips you make the more money you make,” he says.

He adds that he makes several stops along the way, loading the goods into another vehicle in case police officers are tipped off based on number plates.

In September, the police intercepted alcohol worth Sh1 million being ferried from Uganda. Busia County Commissioner Jacob Narengo said at the time the alcohol belonged to an elected leader in Kisii County whose personal assistant was among those escorting it.

Kamajugo says tax evasion and trade misinvoicing continues to hinder economic growth in countries in East Africa, despite efforts to fix the system.

According to a report released in October by the Global Finance Trust (GFT), Kenya lost Sh77.3 billion in 2013 due to import inaccuracies. Of this, Sh32.6 billion was from uncollected VAT and Sh23.1 billion and Sh21.5 billion were from uncollected custom duties and corporate income tax, respectively. It found that importers and exporters devalued goods – imports and exports – to evade taxes, winning huge tax reimbursements from the government and sending profits to foreign company accounts.

“It is a major contributor to poverty, inequality and insecurity in emerging markets and developing economies. The social cost attendant to trade misinvoicing undermines sustainable growth in living standards and exacerbates inequities and social divisions, issues which are critical in Kenya today,” the GFT president said during the release of the report.

And it doesn’t happen only in Busia. Similar events play out at other border points, including the Kenya-Tanzania crossings.

Avoid getting caught

“Sometimes goods are deliberately delivered to the border late at night when few people are watching. Drivers work with Immigration officials to avoid getting caught,” says Allan Ochieng’, a long distance truck driver.

President Uhuru Kenyatta, while launching the One-Stop Border point at Namanga, warned Immigration officials against corruption. “We note that trade between the two countries in most cases is curtailed by those who are given the job to man our border posts. Instead of these people assisting citizens to trade freely, they engage in corruption. This must stop,” he said.

But Kamajugo says reducing border tax evasion will mean fixing the system, rather than run after individuals.

“For instance, if someone left Kenya with some items on a truck, it should be a coordinated process where officials from both countries check the items at the same time. The goods should be declared once and confirmed on arrival,” he says.

According to James Malinzi, Uganda Revenue Authority (URA) officer in-charge of Busia Uganda region, Kenya and Uganda should harmonise tax on products to reduce the current wide tax disparity between the two countries.

- This story was produced with the support of Thomson Reuters Foundation as part of Wealth of Nations, a media skills development programme