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KRA now goes after firm in Sh5b health scam for tax evasion

BUSINESS
By Kamau Muthoni | January 13th 2017
Kenya Revenue Authority (KRA) is hot on the heels of Estama Ltd, seeking to freeze seven bank accounts linked to the firm that was the biggest beneficiary of the scam after receiving Sh1 billion of the cash meant for expectant mothers and newborns.PHOTO: COURTESY

A firm said to be a beneficiary of the Sh5.3 billion Health Ministry scam is in trouble for alleged tax evasion.

Kenya Revenue Authority (KRA) is hot on the heels of Estama Ltd, seeking to freeze seven bank accounts linked to the firm that was the biggest beneficiary of the scam after receiving Sh1 billion of the cash meant for expectant mothers and newborns.

The scam involved diversion of more than Sh5 billion in an NYS-style mega corruption scandal where ministry officials made double payments for goods through manipulation of the Integrated Financial Management System (IFMIS).

According to court papers filed by KRA before High Court Judge Grace Nzioka, Estama is suspected to have started moving Sh800 million, part of the money paid to it by the Health ministry. KRA is targeting the firm’s directors Njage Makanga and Irene Makanga as well as another firm, Business Capital Access Ltd in the quest to recover lost revenue from their dealings, including transactions from the Health ministry scandal.

“If the funds in the accounts of the respondents are not preserved, then it is highly likely that the respondents may frustrate the recovery of taxes if information on the commissioner’s intention to raise tax assessment is disclosed by withdrawing the money, transferring or putting it out of reach of the applicant,” said KRA’s lawyer Sylvester Okello.

Interestingly, the taxman claims the company, given the contract to supply medical mobile clinics, has already wired Sh330 million to an unknown offshore account. KRA demanded that Estama provide seven items, among them all its bank statements and those of its directors, including for overseas accounts. The taxman is seeking the firm’s bank statements from 2011 to date as well as all contracts that it has undertaken over the period.

“The applicant has credible information that the first respondent ( Estama) has been moving funds from its known accounts to the accounts of the second (Njage) and third (Irene) respondents and other secret accounts, some of which are offshore accounts,” the court heard.

KRA also said its analysis on Estama’s business revealed a possible overstating of purchases in order for the firm to reduce VAT tax liability.

The tax agency had written to three banks on December 29, last year, requiring them not to allow transfers of the money for 10 days without its authority or from the court.

Justice Nzioka ordered that the taxman first serve the firm with court papers, as she could not freeze its accounts without hearing their side of the story. KRA will also have to specify the claim it is seeking from Estama. The case will be mentioned on January 20.

 

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