Former Nairobi governor Evans Kidero will now pay Kenya Revenue Authority (KRA) over Sh400 million tax after the commercial court found that he had no proof that money in his accounts was campaign donations. Justice David Majanja ordered Dr Kidero to pay KRA a total Sh427 million after finding that he had no proof that the money from audited accounts to bankroll his then Nairobi County Governor’s seat was donated by his friends.
“In sum and for the reasons I have elucidated above, I agree with the Commissioner that the respondent (Kidero) failed to discharge his burden as the evidence on record could not support the conclusions reached by the tribunal,” ruled Justice Majanja.
In 2016, KRA conducted an audit of Kidero’s financial and business affairs for the income period of January 2011 to December 2015.
It slapped him with Sh680 million tax that included penalties and interest. He then challenged the same before the tax appeals tribunal, arguing that out of the money, Sh423 million was donations for campaigns.
However, KRA argued that Kidero did not provide a breakdown of how and when the money was banked in his personal account, Evans Kidero Center account as well as the M-Pesa till number. The tribunal agreed with Kidero that campaign money cannot be taxed.
Aggrieved, KRA moved to the commercial court arguing that the tribunal failed to factor in there was no evidence on the amount demanded.
In the case, Kidero argued he set aside a Sh423 million war-chest to reclaim the Nairobi governor seat. He ended up spending Sh418 million on campaigns, left with Sh4 million pocket change and lost the race.
According to a breakdown of the spending offered in the court case, Kidero used Sh53 million to set up a campaign centre to run his operations. Another Sh37 million was spent on his party, the Orange Democratic Movement (ODM).
To rent an office space for his political activities for 36 months, Kidero splashed Sh7 million. Research and poll tracking cost him Sh8 million and spent Sh20 million on the day of the launch of his bid.
According to Kidero, nominations cost him Sh25 million, media and publicity Sh75 million and publicity materials Sh47 million.
Agents gulped his Sh55 million in reimbursement for travel costs. To monitor the election, Kidero parted with Sh25 million, fuelled his cars with Sh19 million, repaired them with a similar amount and entertained his campaigners with Sh6 million.
He had an additional Sh16 million as capital expenditure. In the court documents, Kidero attached a list of the people he invited to his fund-raiser, presumably the same people who contributed the millions.
Sh4 million remained
The list includes top honchos in business and politics. In the end, only Sh4 million remained for a man who became the city’s first governor in 2013 riding under the “Dawa ya Nairobi” catchphrase.
In response, Kidero provided receipts and mobile phone numbers of those he claimed were the contributors. KRA, however, concluded he ought to pay tax for the same.
The tax tribunal agreed with Kidero that he was only required to provide proof of his source of money to KRA and nothing more.
KRA in its appeal before the High Court faulted the tribunal for finding that Kidero had proved that Sh423 million was from harambees and was meant to run his campaign juggernaut.
It argued that it was impossible to distinguish money in his accounts.
It claimed that he got money earlier than the campaign period.
“The tribunal erred in law and fact in finding that the funds in dispute were campaign funds and ignored the patterns of deposits of the money between the year 2011 and 2013. The tribunal erred in law and fact by ignoring the political campaign guidelines,” KRA argued.
In its assessment, KRA claimed that Kidero had increased his share holding in Family Bank in 2013 by buying 3.19 million shares. He is said to have bought another 7.8 million in 2014.
According to the taxman, in November 2014, Kidero took a Sh36 million loan to buy 1.4 million shares.
“We were unable to trace the source of funding for the remainder of shares worth Sh239 million. This figure has been charged as undeclared source of income,” KRA informed the former governor.
KRA also went for Kidero’s properties - Great Rift Valley 91A and 91B which it valued at Sh50 million, a residential home in Muthaiga valued at Sh300 million, Rosslyn Estate house at Sh90 million and Vista Investment Limited which is rented and valued at Sh65 million.
KRA claimed that Kidero banked Sh702 million in 2011, Sh1.4 billion in 2012, Sh180 million in 2013, Sh306 million in 2014 and Sh102 million in 2015. Kidero opposed the assessment. On Family Bank shares, he argued that they are not additional income and cannot be charged. On funding of properties charged, he faulted KRA, saying the same could also not be charged.
He said his wife Susan Akello Mboya had declared rental income for the amount he is alleged not to have declared.
KRA also slapped Kidero with Sh74 million-tax demand over his Vista Investments Limited. This too, KRA claimed that it was impossible to ascertain the source of the money. The commission asserted that Vista was an undeclared source of income.
Sh74 million loan
In response, Kidero explained that Vista Investments Limited was a different entity that paid its own tax. He said Gem Apartment Limited took a Sh74 million loan from Family Bank to buy a property owned by Vista. He, however, changed his mind and bought shares in the firm.
On the Muthaiga property, the former governor claimed the commissioner was on a guesswork mission in order to raise a nonexisting tax.
“The property is jointly owned by my spouse Susan Akello Mboya and I, and it was purchased in 2010, which is a period outside the investigation period and therefore does not constitute additional income chargeable to tax,” Kidero alleged.
He claimed they bought the property at Sh83 million and not the Sh300 million assessed by the commissioner.
The former governor also argued that he bought Rosslyn House at Sh50 million and not Sh90 million.
This, he said, was from a mortgage from Commercial Bank of Africa.
“I verily believe the commissioner of investigations and enforcement was under pressure from my political opponents to harass and project me in bad light in my political standing as governor of Nairobi City County, as one who owed KRA Sh680 million and was non-tax compliant without allowing me my constitutional right to fair administrative action,” he claimed. Justice Majanja found he could not also prove that the Sh74 million was a loan.