Kemsa scam: KRA told to go after tax cheats

 

Lawmakers have asked the Kenya Revenue Authority (KRA) to recover tax from Covid-19 tenderpreneurs who imported personal protective equipment and sold them to the State medical supplier at 16 per cent value added tax, yet the government had reduced it to 14 per cent.

The National Assembly’s Public Investments Committee (PIC), which is investigating the Sh7.8 billion scandal at the Kenya Medical Supplies Authority (Kemsa) wants the taxman to recover the two per cent from all the firms that did not reduce the prices of their commodities to reflect the lower VAT. The committee said failure to sell the goods at the reduced VAT amounts to defrauding the public.

The MPs argued that the firms should have sold the items at a reduced price, since even the World Health Organization had announced exemption of certain Covid-19 materials from taxes to ease restrictions on the export and distribution of personal protective equipment (PPEs) and other medical supplies.

Committee chairman Abdulswamad Nassir said KRA should track the firms that did not reduce their prices to reflect the 14 per cent VAT as announced by the government.

Recover the money

“We need to know these firms and KRA should recover the money they were paid (above the 14 per cent),” Mr Nassir said.

The revelation came during a meeting with Nairobi Enterprises Ltd directors, who told MPs that despite reducing the prices of their PPEs to reflect the reduction of the VAT, they have not been paid by Kemsa.

Owner of Nairobi Enterprises Ltd (NEL) Rajan Dhanani told the committee that the firm offered to supply Kemsa with face masks at Sh2,080 for a 50-pack or Sh41 a piece, but it is yet to be paid about Sh200 million.

However, some companies that quoted prices as high as Sh4,500 for a 50-pack or Sh90 per mask, were paid by Kemsa within two weeks.

“It is baffling that a company that actually refused to supply on a mere commitment letter was 40 per cent cheaper, and employs over 240, is being frustrated yet those with one or two directors were paid in weeks,” said Mr Nassir.

“Of all companies, NEL is the only one that did not do supply without the tenders. They are among Kenyans who strived to do things the right way,” added the Mvita MP.

Documents presented before the committee indicate that Kemsa entered into contracts with 102 local firms to supply Covid-19-related items valued at Sh7.8 billion.

So far, the medical agency has paid out Sh4.5 billion to suppliers. That was before the Ethics and Anti-Corruption Commission stopped any further payments pending the ongoing investigations.

Appearing before the committee last month, KRA Commissioner General Githii Mburu told the committee that after scrutiny of companies that imported Covid-19-related materials, it emerged that 77 did not pay any taxes. “Seventy-seven companies did not declare any supplies to Kemsa. KRA is currently conducting reviews on the companies to establish compliance status,” Mr Mburu said.

“We have deployed comprehensive audits, compliance checks and tax intelligence reviews to ensure integrity and fairness is infused into how companies handled their tax administration matters,” he said.

Documents tabled by KRA before the committee show that out of the 102 firms, only 15 companies declared supplies to Kemsa under general Value Added Tax (VAT) rate and paid respective VAT totalling Sh191 million.

Eight declared supplies to Kemsa under the exempt supplies – which are not subject to tax -- worth Sh749,000.  BY DAILY NATION