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KRA goes after seven governors in Sh13b tax row

By Geoffrey Mosoku and Cyrus Ombati | September 5th 2019
KRA headquarters at Times Towers in Nairobi [File, Standard]

Nairobi Governor Mike Sonko will today be questioned by officers from the Kenya Revenue Authority (KRA) for failure to remit more than Sh4.5 billion in taxes.

According to KRA, Nairobi and six other counties failed to remit Sh13 billion. The claims arise from tax deducted and which was never remitted by the county governments.

The taxman is also going after the governors to recover tax due from payments made to county service providers and contractors.

They are Value Added Tax (VAT), income tax on profits, where some service providers are paid huge sums of money by various counties but fail to declare these for tax purposes.

The seven governors are among the first batch of leaders expected to appear before the Tax Dispute Resolution Division based at the Ushuru Pension Towers in Upper Hill, Nairobi.

According to KRA, Sonko will be required to explain failure to remit his county’s Sh4.5 billion in tax arrears.

The other six counties on KRA’s radar are Migori, Homa Bay, Turkana, Kilifi, Murang’a and Kiambu. A review exercise of several others is in the final stages.

The taxman is claiming a collective Sh8.8 billion from the six counties.

According to KRA, Kiambu County, under Ferdinand Waititu, owes Sh3,216,613,189. Kilifi County, under Amason Kingi apparently owes Sh2,059,410,078 while Okoth Obado’s Migori has Sh1,300,000,000 as unsettled tax.

The taxman claims that Mwangi wa Iria’s Murang’a owes Sh1,021,174,037, Cyprian Awiti’s Homa Bay (Sh765,718,819) and Josphat Nanok’s Turkana (Sh455,634,523).

Withholding tax

Already Sonko has been summoned to appear today to explain the whereabouts of money deducted from county employees as PAYE, and suppliers as withholding tax, but which was never surrendered to the taxman.

The taxman claims that Sonko, in his role as county boss, failed to comply with the law and may have committed offenses according to the provisions of Tax Procedures Act, which may lead to prosecution and other actions. However, yesterday Sonko hit back, accusing KRA of trying to use illegal means to recover the money even after his administration indicated willingness to offset the demand.   

According to Sonko, the amount claimed arose from the previous administration and had been carried forward as part of pending bills.

In June, KRA froze City Hall accounts to recover the Sh4.5 billion. But Sonko says he went to court and successfully unfroze the accounts and that there was an agreement with the national government dubbed “Nairobi City County Recovery Plan” that provided for a debt swap.

“KRA does not seem to have any information on the debt swap deal and from the court and thus any attempt to institute any recovery for this money will be contempt of court,” he said.

Confirming that he will honour the summons, Sonko said he might not discuss much with KRA officials since the matter is in court.

“I will honour the summons and will present the court order to them,” he said.

The governor claimed KRA had recovered Sh1.2 billion from City Hall during the transition period in 2017 and that this transaction was not reflected in the taxman’s books.

Face prosecution 

Elizabeth Meyo, KRA’s Commissioner for Domestic Taxes, warned that governors faced prosecution if they failed to honour the summonses.

“All governors who do not comply will be prosecuted,” said Ms Meyo.

She urged the governors to ensure they had paid personal taxes from their incomes.

Last week, Council of Governors chairman Wycliffe Oparanya confirmed that his colleagues had received demand notices and summonses for non-remittance, which he attributed to transition periods during budget process. “Some of these arrears result from the confusion during the budget process,” said the Kakamega Governor.

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