The taxman is pursuing some of the country’s richest persons as he seeks to recover a whopping Sh250 billion lost through tax evasion in the past two years only.
Newly appointed Kenya Revenue Authority (KRA) commissioner-general James Githii Mburu told the Sunday Nation that the agency was targeting to recover the cash through prosecutions and other administrative actions.
GIVE CAESAR
“This is the amount that we have been able to confirm and verify so far,” said Mr Mburu in his first wide-ranging media interview since being appointed to the post two months ago.
In the exclusive interview on Friday, Mr Mburu, 47, laid bare to the Sunday Nation the extent of the cancer of tax evasion by a few individuals and companies.
“Tax evasion is bleeding this country to death,” said Mr Mburu, who was appointed to the position in June to succeed Mr John Njiraini, who had served for the past seven years. “We must stop it!”
On Saturday, KRA’s efforts got a big boost from President Uhuru Kenyatta who indicated, in his first public utterances on the issue, that the war on the tax cheats was not about to stop.
Speaking during celebrations to mark 60 years since the founding of the Christ is the Answer Ministries (CITAM), the Head of State said: “We will continue to say that as long as they continue doing that (evading taxes), Caesar must get his fair share. Why should it go to the pockets of five people?”
Recently, KRA served a number of firms with a cumulative tax bill of Sh116 billion, which Mr Mburu said is part of the quarter-trillion shillings in taxes they seek to recover. Mr Mburu says more arrests and negotiations with tax evaders will follow but declined to say which businesses and sectors are being targeted.
As the Friday midmorning interview went on in a boardroom at KRA’s headquarters at Times Tower, across town at the Milimani Law Courts, his latest suspects in the renewed war against tax evasion were taking plea.
At that time Mrs Tabitha Karanja and her husband, Mr Joseph Karanja, both founders of Naivasha-based Keroche Breweries Ltd, were denying charges of evading taxes amounting to Sh14.4 billion.
UNAPOLOGETIC
Their case follows hot on the heels of another Sh41 billion tax evasion case against billionaire businessman Humphrey Kariuki, who is the proprietor of, among other companies, Africa Spirits Ltd.
Before that, the taxman had slapped 27 betting firms with a tax demand of Sh61 billion, which led the government to suspend their operating licences nearly two months ago.
But it was the arrest of Mrs Karanja and her husband – a couple who through sheer grit built Kenya’s first successful indigenous brewing company against all odds – that elicited uproar from the public and the political class.
A section of leaders from President Kenyatta’s Jubilee Party claimed that KRA is being used to destroy the businesses of a few select wealthy entrepreneurs, especially from Mt Kenya region.
“While there may be tax matters that require redress, it would be an act of utmost betrayal to Kenyans who have built their businesses over the years to be reduced to fugitives,” Nakuru Governor Lee Kinyanjui protested this week. Keroche Breweries is located in his county.
However, Mr Mburu is unapologetic about the crackdown he and his team have embarked on. “There are a few Kenyans who have made tax evasion their business model. We will not spare them,” he said.
He was accompanied to the interview by Ms Elizabeth Meyo, the commissioner for domestic taxes, and Mr Mohamed Ahmed, who is the commissioner for strategy, innovation and risk management.
The CG was agitated by claims that the war on tax cheats is a witch-hunt. “We are not targeting any individual or business,” he said. “We are looking at who ought to pay a certain amount of taxes but is not doing so,” he said.
CONFIDENT
The crackdown on the tax cheats comes at a time when a section of the Jubilee Party leadership is crying foul that the war on corruption has been weaponised for 2022 presidential succession battles.
However, Mr Mburu said the current political climate, especially the handshake between President Kenyatta and Opposition leader Raila odinga, has made his work much easier. “The current politics of the nation is very supportive of what we are doing,” he said.
He said the actions they have taken in regards to the suspected tax evaders is informed by the intelligence they have gathered over time and are not spur-of-the-moment decisions.
“There are many businesses and individuals who have lifestyles that are not consistent with what they pay. The volumes of the businesses they do is not consistent with what we see in our records,” he said.
Mr Mburu’s appointment for a three-year term by former Finance Cabinet Secretary Henry Rotich comes at a time when the taxman has failed to meet its target for the past financial years.
The taxman, for example, missed the target for the 2018/2019 year ended June 2018 by Sh106 billion, while that for the years ended June 2017 and June 2016 fell short by Sh66.6 billion and Sh12.4 billion.
On Mr Mburu’s shoulders rests the burden of steering KRA to raise Sh2.115 trillion in revenue – up from Sh1.85 trillion last year – to fund the Sh3.1 trillion 2019/2020 budget announced by Mr Rotich in June.
Regardless of the figures, Mr Mburu sounds confident of delivering. “There is enough money in this economy that we don’t even need to borrow loans,” he said. “I know where the money is and I am going for it.”
INTRANSIGENT
This statement is directed at big businesses which he believes are not doing their fair share in contributing towards the baking of the national cake, such as the ones that are already in court.
He said they have recovered Sh6 billion from some of the 27 betting firms whose licences are among those that have been suspended by the government over tax issues.
“We are willing and determined to go for that money wherever it is,” said Mr Mburu. “You will continue hearing me say so and so has evaded Sh10 billion, another Sh2 billion and so forth.”
In doing so, however, he insisted that they are not out to kill the businesses he and his team have targeted. He said they have tried the civil route but sometimes it does not work and KRA ends up losing.
“We are required by law to secure taxes,” he said. “What is the point of going through the litigation process if by the time you are through, there is no money to be collected? They hid it.”
He disclosed that many individuals and companies on their radar have approached KRA to discuss how they intend to pay their outstanding taxes, thus saving themselves the public humiliation of being dragged to court.
For the longest time, KRA has treated tax evasion as a civil dispute between it and the concerned parties. Indeed many observers have wondered why KRA has not opted for alternative dispute resolution mechanisms that are provided for in law.
However, Mr Mburu said that they were forced to take the dramatic criminal route in these disputes when the firms and individuals in question became intransigent.
CAPACITY
“We have tried to talk and settle disputes with the people we are investigating. But they just buy time and won’t comply. Then, we have to change the narrative,” he said.
While defending her firm against KRA’s hefty tax demand, Mrs Karanja said that KRA had not notified her of any ongoing investigations against Keroche Breweries, besides a tax dispute which is pending at the tax disputes tribunal.
“I affirm that I have no outstanding tax dispute with Kenya Revenue Authority and that I do not manage any company that has a tax dispute with the KRA,” she said in a press statement.
Observers, such as former presidential candidate Prof James Ole Kiyiapi, wondered how tax evasion of such a magnitude was possible without the knowledge and collusion of KRA staff.
“One question we must all ask: How did Keroche evade taxes to Sh14.4 billion?” he posted on his Twitter account. “This didn’t happen overnight, did it? Where was KRA all this time? Shouldn’t complicit officials at KRA be charged as well?”
Mr Mburu attributed this to lack of enough resources and manpower at the authority. “We have no capacity to review everybody,” he said. “What we do is risk-based approach through which we gather a lot of information about businesses which we think have high risk of not complying.”
COMING PURGE
While he was the commissioner for intelligence and strategic operations before his current appointment, insiders at KRA say he was instrumental in the joint sting operation with the Directorate of Criminal Investigations (DCI) that saw more than 80 KRA staff arrested for aiding tax evasion.
He admitted that there are instances where tax evasion is abetted by his staff, a problem they are addressing. “We have investigations going on at a very advanced stage. Action will be seen in the coming days, both administratively and through the court processes,” he said.
Even as he embarks on cleansing the Augean stable at Times Tower, critics point out that the sting operation he oversaw was largely targeted at junior staff only, but he promised that no staff member will be spared in the coming purge.
“Investigations usually reveal that these things start at transactional level. People at this level are often directly linked to a specific transaction. But when investigations progress you will be able to see negligence at higher levels. At that level you will also see whether it was influenced or not. We will soon deal with these senior people who were either negligent or facilitated these vices,” he said.
At the same time he dismissed claims of mass resignations of junior and middle staff at the authority over unrealistic targets. “We give them targets and show them where the money will come from. But in every environment there are people who do not want to give it all and we have allowed them to leave,” he said.
INTELLIGENCE
Mr Mburu said his role as a commissioner of intelligence and strategic operations from 2017 until his recent appointment has prepared him adequately for the current job.
“It gave me access to a lot of information, and you know information is power. In that post I was very operational on the ground, which enabled me to gain a very huge intelligence network. It won’t be easy for someone to come and cheat me as CG. I understand our processes very well,” he said.
Mr Mburu also addressed concerns by activists that his ascension was predetermined and that his career at KRA had been tailored for the current position.
In 2017, activist Okiya Omtata went to court saying that the post of commissioner of intelligence had been created for Mr Mburu and had been given to him non-procedurally.
The Auditor-General agreed with Mr Omtata, saying the post ought to have been advertised. However, Mr Mburu shrugged off these concerns.
“You have to be fair to me. If someone thinks I am not properly appointed then there are avenues they can use to address that. But as far as I am concerned I am properly in office.”
James Mburu’s profile
Mr James Githii Mburu joined the Kenya Revenue Authority 12 years ago, in May 2007, and was responsible for strengthening tax audit operations for the Domestic Taxes Department.
He rose through the ranks, later serving as deputy commissioner for the Investigations and Enforcement Department (IED). He played a vital role in invigorating KRA’s prominence in war against tax fraud, before his appointment in March 2017 as commissioner for intelligence and strategic operations, corruption investigations, cyber surveillance and local and international tax information exchange.
Before joining KRA, Mr Mburu worked as head of technical standards at the Institute of Certified Public Accountants of Kenya (ICPAK) and also briefly worked as a manager at CFC Stanbic Bank.
He holds a Bachelor of Commerce degree from Kenyatta University and a Master of Business Administration degree from the Jomo Kenyatta University of Agriculture & Technology (JKUAT).
He is also a Certified Public Accountant and a Member of the Institute of Certified Public Accountants of Kenya (ICPAK).