KRA Goes After LSK with Ksh186 Million Tax Demand

The Kenya Revenue Authority (KRA) has hit the Law Society of Kenya (LSK) with a Ksh186 million tax bill resulting from its alleged failure to remit taxes in previous years.

According to KRA, part of the money arose from accrued interest over a long period of time.

This comes at a time when the lawyers' body has been battling corruption allegations over its dealings. It was on these grounds that LSK President Nelson Havi, upon assuming office, ordered a probe into the society's financial records, citing irregularities.

LSK President Nelson Havi speaking at a ceremony to admit lawyers to the bar on July 3, 2020

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An Annual General Meeting (AGM) held by LSK at the end of 2020 prompted an internal audit, after a section of members raised concerns regarding LSK's financials. The Lawyers sought to know how their annual contributions were being appropriated.

The audit report revealed that poor governance dating back several years was slowly draining LSK's pocket.

Inflation of prices in the purchase of items by the society was among key factors in the loss of funds. It was further established that records for some expenditures could not be traced. This raised questions as to whether the LSK received value for money in some of its dealings.

The audit report also revealed that between the years 2014 and 2018, the LSK failed to file taxes worth Ksh122,073,296. The taxman imposed an interest rate of 20 per cent on the unpaid bill, which has since accumulated an additional Ksh25,247,248.

KRA further required LSK to pay an additional Kh39,574,533 due to the recurrent delays in payment of the tax bill. The taxman slapped the lawyers with a Value Added Tax (VAT) bill of Ksh157,930,795 inclusive of penalties and interest.

Corporation tax, Pay As You Earn (PAYE), statutory deductions and withholding tax collectively totalled to Ksh28,964,281 of the total figure.

The auditors stated that LSK normally negotiated payment of taxes with KRA informally, however, pointed out a legal loophole that could be employed to avert a large demand on tax obligations.

The taxman has the mandate to review individual and institutional tax records dating back five years. The auditors advised that tax bills be complied with to avoid a KRA audit.

“KRA is allowed by law to review up to a maximum of five years backwards, which implies that if the society is subjected to review, and it has been complying going forward, the risk of paying the arrears reduces,” the report read in part.

Reports indicate that Havi's push for deeper forensics into the LSK's financial records has resulted in the emergence of factions within the lawyer's body.

In December 2020, Lawyer Murigi Kamande moved to court seeking to block Havi directive to have a probe into LSK's books.

KRA Boss James Githii Mburu speaks at a conference in 2019

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