|Informer Reward Scheme|
This is what you need to know…
1. What is Tax fraud/tax evasion?
Tax fraud/tax evasion is a deliberate attempt to illegally obtain a tax benefit. This comes in many forms:
2. What are some of the actions that lead to tax fraud/tax evasion?
a) Manifest Fraud
This occurs when shipping agents illegally alter manifests prior to uploading them to the Customs Manifest Management System (MMS), thereby setting the stage for false declarations.
b) Use of fake security bonds to clear transit goods
Some importers and clearing agents use fake Customs transit bonds to clear transit goods. This happens by collusion between clearing agents, insurance companies and Customs officers.
c) Diversion/Dumping of transit goods
Transit goods are goods imported through the East African Community (EAC) region to a country outside the region. Transit goods within the EAC region are not subject to import duty. However if the consignment fails to exit the region within the prescribed period and no official extension is granted, duty becomes due (this is diversion of transit goods). Customs department secure the duty due on transit cargo through the execution of a security bond. Goods prone to diversion include sugar, petroleum, rice and motor vehicles
d) Customs Mis-declarations
A Customs declaration is a statement showing goods being imported on which duty will have to be paid. This is done by filling in a Customs declaration form. However, some importers/clearing agents make wrong declarations with the objective of evading payment of duties or reducing the duties payable. Making a wrong declaration (i.e. mis-declaration) is a prosecutable offence.
This involves importation or export of goods secretly in violation of the law, especially without payment of duties. Recent cases include: importation of high end vehicles cleared as mattresses, baby car seats, bed sofas, toys, clothes, beach beds, shoes, belts and handbags.
f) Fraudulent cancellation of export entries
This is use of fake Customs entries as proof of export, which thereafter leading to fraudulent VAT refund claims.
g) Import/Export of prohibited or restricted goods
Prohibited goods are the goods that cannot be imported/exported into/out of the country. Restricted goods are those which must meet certain conditions before clearance through Customs.
Examples: ivory, macadamia nuts, flora and fauna etc
h) Fake payments of import taxes
This happens when Customs entries are fraudulently posted in the Customs system and validated with fake bank payment receipts.
i) Dealing with excisable goods without a valid licence
By Law, dealers in excisable products (especially tobacco, wines and spirits) should be licensed.
j) Nil/non filing income tax returns
All individuals with income are required by law to submit Income tax returns together with accounts where applicable. The returns are due on or before the end of the 6th month after the end of accounting period. Non-submission of tax return may result into prosecution.
k) Invoice fraud
The scheme involves shell companies through which money is channeled as payments for purchase of goods while in actual sense no goods are supplied.
l) Under declaration of income
By Law, all income earned in Kenya is taxable. However, some individuals under declare their income for purposes of reducing their tax liability.
3. How can one report a tax fraud?
Informers may submit information either in person, in writing, by telephone, or through email to:
(i) Complaints and Information Centre in the Commissioner General’s Office
Office of the Commissioner General
Times Tower, 30th floor
P. O. Box 48240-00100 GPO.
Telephone: + 254 (0)20 281 7700 (hotline) + 254 (0)20 281 7800 (hotline ) +254 (0)20 34 33 42
(ii) Investigations & Enforcement offices at Kenya Revenue Authority Offices in
Mombasa, Kisumu, Eldoret and Nyeri for individuals located in those areas.
(iii) Intelligence & Profiling Office:
Times Tower Building, 15th floor
Telephone (toll free line): 0800721888
(iv) Commissioner, Investigations & Enforcement
Times Tower Building, 26th floor
Telephone: +254(0) 20 2817045
4. Does KRA reward informants who have successfully reported tax fraud/tax evasion cases?
Section 5A(b) of the KRA Act Cap 469 provides for payment of rewards to informers in the case of information leading to the recovery of unassessed duties or taxes, 5% of the taxes or duties so recovered or KES 2 million, whichever is the less.
The public is requested to report any cases of potential tax fraud/evasion through the above listed channels.