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KRA targets large taxpayers in IMF-backed tax evasion probe

Concept of IMF tranches. [Getty Images]

The government has narrowed its unprecedented probe on tax evasion to the large taxpayers office at the Kenya Revenue Authority (KRA).

KRA has been under pressure to seal revenue leaks against the backdrop of higher collection targets set by the William Ruto administration.

And now the International Monetary Fund (IMF) has revealed that Treasury believes accountability checks at the large taxpayers office are key in ending alleged graft at the agency.

The office, based along Muthangari Drive in the upmarket Westlands commercial district in Nairobi, was formed in 1988 and serves firms with an annual turnover above Sh750 million.

Taxpayers targeted by the office contributed more than half of the Sh2.166 trillion collected by KRA between July 2022 and June 30 this year, underling its significance.

President William Ruto has often expressed his frustration with KRA's failure to reach targets and wants the taxman to end graft and adopt technology to boost collections.

This is part of his grand plan to broaden the country's tax base and raise revenue to enable him to deliver on his raft of pledges over the next financial year.

IMF says KRA's effectiveness in tax collection is essential for the cash-strapped government to mobilise critical resources to prop up the battered economy.

"Starting from April, KRA has in response adopted several Rapid Revenue Initiatives (RRIs) to sustain collection and limit any potential revenue shortfall," the Treasury told the IMF, according to newly published correspondence by the global lender.

"We expect the RRIs to yield 0.4 per cent of GDP in FY2022-23 by fast-tracking ongoing compliance checks and audits at the large taxpayer office; settling well-identified disputes on tax debt; and providing incentives for timely tax payment."

Wanton bribe-taking

Treasury told the IMF the checks will help "contain" the potential tax shortfall.

President Ruto had in May this year made a stunning charge that rogue workers at Times Tower are colluding with tax evaders, which renewed calls for a clean-up of the tax agency.

He said there was an elaborate tax evasion syndicate involving rogue senior KRA employees, warning this could partly be the missing link in the taxman's failure to achieve targets.

"Collusion, wanton bribe-taking and general corruption continue to pervade operations of KRA, facilitating tax evasion, massive leakages of potential revenue and inability to meet revenue targets," said Ruto while filing his tax returns at KRA headquarters.

A much-awaited purge to rid the taxman of rogue workers is yet to publicly kick off, though, with anti-graft agencies remaining tight-lipped.

The Standard earlier learned that on the radar of investigative agencies seeking to crack the multi-billion-shilling syndicate include senior managers at KRA, some board members and low-ranking staff.

Sources in government told us that rogue businessmen have been colluding with KRA officers to manipulate KRA systems to reduce tax liabilities.

The sophisticated cartels launch the schemes during tax audits and compliance checks for firms with pending bills.

They then lure KRA officers and offer them bribes in exchange for reduction of tax payable.

Ruto's warning was the latest from successive heads of government and the most serious allegation levelled against KRA.

In 2015, the then president Uhuru Kenyatta ordered that all KRA staff undergo a compulsory lifestyle audit to account for their sources of wealth.

This followed financial scandals that had rocked KRA with revelations that millions of shillings were lost through corrupt deals.

No public information was ever provided on the audit findings.

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