Kenya’s third President Mwai Kibaki ran the country with little donor funding for 10 years because of a disciplined collection of revenue that pushed back against powerful political forces, his star tax czar has said.
Kibaki’s Kenya Revenue Authority director-general Michael Gitau Waweru says in a new book that a number of reforms initiated at the time and a dogged determination not to be derailed by political interference saw tax revenues jump 116 per cent by 2005, only two years after the National Rainbow Coalition came into power.
“As the person charged with overseeing the collection of government revenue, that sometimes put me on a collision course with powerful figures who tried to use their offices to avoid paying tax or shield relatives and friends on KRA’s radar for avoiding tax. I knew if I entertained even one person, that would undermine the confidence of my team,” he writes.
Thus, some of the run-ins involved the country’s top political figures.
“At one time KRA issued an agency notice to a cigarette manufacturing company asking them to pay money they owed us. Next thing I received a phone call from Raila Odinga, who at that time was Prime Minister in the coalition government formed after the 2007 General Election.
“Commissioner General, please tell Mr XXX (name redacted for legal reasons) to lift the agency notice against my friend,” Mr Waweru quotes Raila as asking him.
“Prime Minister, you don’t have the power to do that,” he replied.
“I am the coordinator of government; how come I don’t have the power?”, Raila poses, to which Mr Waweru responds: “Even my minister does not tell me to collect taxes from one person and not another.”
At another time a matter arose about suspicious cargo coming in through Eldoret International Airport. He writes that the owners had refused to abide by the rules requiring consolidated cargo to bear names of individual importers, their addresses and PIN numbers. They instead went to Uhuru Kenyatta, then Deputy Prime Minister and Finance Minister, for protection.
“Uhuru called me and said, “Can you come to my office? I want us to sort out this matter about Eldoret Airport.”
“DPM, I am sorry I will not come,” I responded.
“Why?”
“Because if I come, from now on all tax matters will be resolved in your office and it is not healthy for you.”
After that Mr Kenyatta promised to call but didn’t. Shortly after, however, Mr William Ruto, then MP for Eldoret North, came in with the traders in question. Again, they were rebuffed in similar fashion, according to the book, which records Waweru’s rebellious streak.
Mr Waweru says KRA officials informed Mr Ruto of the seizure of the prohibited goods coming through Eldoret Airport, which included chemicals for making illegal addictive drugs, at which point
“Ruto became restless and looked uncomfortable”.
“He glanced at his watch several times and then abruptly stood up and said: ‘I was going for another meeting. Please proceed without me.’”
While political office in Kenya has routinely been used to aid tax malpractices, it is not clear from Mr Waweru’s explanations whether Mr Kenyatta, Mr Odinga or Dr Ruto were seeking audience with him to push him to commit a felony, and so the Saturday Nation is not imputing ill motive on the trio. Also, it is not clear whether the trio would have somehow benefitted from such waivers. Mr Waweru says most politicians, except Mr Kibaki, sought favours from him.
His dogged determination against political interference seemed to be working for him. For instance, customs revenue alone rose from Sh96 billion in 2003/2004 to Sh179 billion in 2008/2009, which was made even more remarkable by the fact that Value Added Tax (VAT) had been cut from 18 to 16 percent.
“KRA had collected Sh201 billion in the year ending June 2003. The following year we collected Sh229 billion,” he says in Kenya’s Tax Czar, An Autobiography of M G Waweru, published by Kenway Publications, an imprint of East African Educational Publishers (EAEP).
In the year ending June 2012, the time Mr Waweru retired, KRA had collected Sh704 billion. “I think my achievement in KRA was that I had enabled the government to finance 95 per cent of its budget from internally generated funds,” he says.
Waweru’s revelations come against the backdrop of jitters over Kenya’s current debt burden. The country’s overall public debt is currently estimated at 69 per cent of the economy. This is against the International Monetary Fund’s recommendation of 40 per cent ceiling for developing countries. The Kibaki years had the lowest debt-to-GDP ratio in recent memory, with March 2010 being the lowest at 39.7 per cent.
“I found a corporation reeling under graft, with more revenue leaks than a sieve, leaving no money to spend on Narc’s priorities. The running joke at the time, often depicted in newspaper cartoons, was of a president roaming Western capitals with a begging bowl in hand, desperately looking for loans,”
Waweru writes in the autobiography, which also details his experiences in the shadows of the country’s key political figures.
“The first thing I told staff was that I did not care what they had done in the past, but if I found anyone condoning corruption, I would sack them. Some decided to test my resolve and we ended up sacking very many people, including two commissioners.”
Waweru, an audit guru, also gives an insight into the world of bilateral loans and their costing.
“A country can always get loans from the international money market even when it is common knowledge that the bulk of it ends up in people’s pockets instead of the intended purpose. In the same way that a person perceived as high risk for defaulting can always get money from loan sharks and shylocks who charge punitive interest rates, countries where mismanagement of national finances is rampant can still get loans. But they get the loans at premium interest rates compared to countries that manage their finances prudently.”
Central to the reforms were the automation of KRA systems, a process he says was bitterly resisted by some staff.
Some of the ways the staff used to try to beat the system were comical. “They included, for instance, pulling the network cables from the wall socket and then using the excuse of the computer not working so as to revert to the manual way of doing things.”
Another challenge he was faced with was that of clearing agents preparing fake entries, paying minimal duty then hacking into the communication between the bank and KRA and then keying in the correct data.
In one incident a clearing agent had declared that an importer had bought in a Mitsubishi Fuso truck that weighed 40 kilogrammes, paid minimal duty and thereafter intercepted the communication between the bank and KRA and put in the correct data.
Sting operations at the time also revealed audacious corruption by staff who operated with unimaginable impunity. “One case involved customs staff at Malaba border post who used to stamp documentation from traders showing that goods had left the country when in fact such goods were sold in the local market.”
In one such case documents showed export of over 30 tonnes of steel to Uganda in a vehicle bearing the registration of one of KRA’s vehicles — a Peugeot 504 which was then packed at Times Tower. The officer had stamped the documents without even bothering to ask where the vehicle was.
In yet another one case “the customs official came out of the bathroom with a towel draped around his waist, stamped the forms to clear the goods, received a fat envelop full of cash and went back to his shower without even conducting a cursory inspection of the cargo”.
Waweru says KRA dismissed more than 500 people during his tenure, yet no one went “running to the media or claimed they were being targeted” because of their tribe because they had watertight cases. “We did not bother with prosecutions. Imagine prosecuting 500 cases. But we made sure we had solid cases.”
Mr Waweru says the Grand Coalition Government sometimes caused him problems when members of one side of the political divide criticised KRA just to score brownie points.
“At one time, at a business roundtable meeting between the government and traders, the Prime Minister said that KRA was not Grand Coalition compliant. He cited, as an example, a case involving Catholic nuns he had met in Minnesota who complained bitterly about KRA customs officers who refused to release, duty-free, secondhand clothes they had donated to the poor.
“After leaving the meeting I tried to follow up the matter with the PM’s office to get the details of the container, but no information was forthcoming. Even much later, I had no idea what the PM meant when he said KRA was not “Grand Coalition compliant.”
He says after getting tired of “all the pettiness” he got reprieve after he wrote a memorandum to President Kibaki.
“In it, I detailed incidents of ministers in his government fighting us for no reason. I don’t know what Kibaki did, but the pressure and the useless political talk about KRA died after that. I had run-ins with politicians from time to time, but I refused to allow anyone to distract me from our core business of maximising tax revenue.”
These bold actions bore fruit and by 2006, KRA had, for the first time, exited Transparency International’s bribery index, a place it had dwelt prominently in the Moi years.
Some of the reforms instated during his time was the establishment of One Stop Border Posts to speed up clearing of goods and cut costs for trans-country traders. Others were of a symbolic nature, including the Taxpayer’s Day, borrowed from Rwanda.
“We held the first event in 2003 and it was so successful that it became an annual event graced by President Kibaki. We wanted to recognise taxpayers as heroes (shujaa) so we held the event on the next working day after Kenyatta Day (now Mashujaa Day). We rolled out communication campaigns telling Kenyans that paying tax would set us free from the shackles of donors. That was where the slogan kulipa ushuru ni kujitegemea came from, a rough translation of our motto, “Pay taxes and set our country free.”
In the foreword, President Kibaki praises the man who helped author his legacy.
“The account Michael has given of himself in this candid memoir traces the journey of a man of notable resolve and character. During his tenure as KRA’s commissioner-general, Michael distinguished himself as a public-spirited overseer. It was a period during which improved tax collection visible changed Kenya’s economic fortunes.” BY DAILY NATION