The Kenya Revenue Authority (KRA) has lost its bid to collect Ksh 516 million tax demand in a case where they had accused a local businessman of tax evasion.
The Court of Appeal ruled in favour of the businessman and his firm, finding fault with KRA's Trade and Simba System officials who underestimated the tax that was supposed to be paid in 2007.
KRA was accused of affirming that the firm was requested to pay Ksh 228 million rice import duty.
The defense side argued that the firm was only notified that it had paid less tax for the 2007 imports four years later in 2011.
By then KRA was demanding Ksh 378 million tax and a penalty fee of Ksh 138 million with the total amounting to Ksh 516 million.
The taxman was further accused of attempting to disown a letter written by the firm requesting clarification on import duty.
KRA argued that its systems failed to capture the valuated amount the firm was supposed to pay.
"It is also not surprising that the appellant (KRA) attempted to disown receipt of a letter dated July 26, 2007, from the respondent seeking clarification on the duty payable, yet the letter bore the appellant’s rubber stamp.
"The act of denying this letter may, regrettably, be suggestive of a lot of going-ons at the appellant’s place of business. It is possible to have technological and human errors, but does it take four years to detect even after it has been pointed out by an importer?" Justices William Ouko, Gatembu Kairu and Fatuma Sichale wondered in their joint ruling.
In October 2020, KRA Commissioner General Githii Mburu lamented that unscrupulous individuals and organised crime perpetrators had hatched ways to avoid paying taxes.
Mburu disclosed that KRA loses Ksh 259 billion every year to such schemes.
He stated that tax authorities and government agencies dealing in financial investigations have heightened efforts to outsmart the cheats.
"We lose money every year and the entities mentioned have been earmarked for further investigations and legal action for non-compliance," Mburu stated.
In June 2020, KRA hit a new record in high tax collection despite the covid-19 pandemic.
The authority collected Ksh 1.607 trillion for the financial year 2019/2020 as compared to Ksh 1.580 trillion collected over the same period between July 2018 and July 2019.
It, however, still missed its initial target by Ksh 275 billion.
