Kenya Revenue Authority loses Sh1 billion tax claim against Dubai firm

KRA Headquarter in Nairobi (PHOTO: FILE)

The Kenya Revenue Authority (KRA) has lost a Sh1.1 billion tax claim against a Dubai firm, with the taxman being accused of misleading the Court.

KRA had rushed to court to be paid part of the Sh1.5 billion that the Supreme Court awarded Geo-Chem Middle East, but the taxman’s decision to file an application against the Dubai firm’s local subsidiary instead ruined its case.

The High Court Judge Mabeya in an April 22 ruling wondered why KRA went after Geo Chem ME (Kenya Branch) instead of its Dubai-based parent company which had won the award after the wrongful termination of a contract to inspect petroleum by the Kenya Bureau of Standards (KEBS).

KRA, through the supporting affidavit of Phillip Munyao, is said to have carried out an audit on Geo Chem ME (Kenya Branch) which revealed suspected tax evasion amounting to 1,084,776,666. But that was only because KEBS was to transfer the award money to the company’s subsidiary.

According to the judge, it is not the subsidiary, which came into existence in 2015 that had done the deal which was signed in 2009. As such the money being transferred to its account did not belong to it.

KRA then tried to undo its mistake by incorporating the name of Geo-Chem Middle East in its subsequent filings. But this also did not help, with the judge noting that the mistake could not be cured.

“The foregoing leaves no doubt in the mind of the Court that the 1st respondent (KRA) was not acting in good faith,” said Mabeya.

Immediately after the Court awarded the Dubai-based company Sh 1,560,624,473 as a payout for the termination, KRA on March 26 demanded KEBS to preserve any funds due to the Geo Chem ME (Kenya Branch) amounting to Sh1,084,776,666 until otherwise advised. But when it presented this request to the High Court a few days later it was declined.

In the meantime, the parent company got wind of the notice, and also rushed to Court, asking the Court to prevent KRA from interfering with the tax credit.

Judge Mabeya agreed with the Dubai-firm, noting that KRA’s actions were “either intended to hide its actions from the applicant (Geo-Chem Middle East) without the knowledge of the applicant or to mislead the Court.”

“A party who presents before Court misleading material or deliberately misleads the court or presents information that it has reason to believe to be incorrect should be denied any favours by the court of law or equity. Such conduct amounts to abuse of the process of the court and must be discouraged. Litigation should at all times be based on bona fides of the parties before the court.”