Kenya Revenue Authority (KRA) has written to commercial banks seeking payment of millions from the accounts of companies it accuses of involvement in a massive tax evasion linked to fake value added tax (VAT) refund invoices.
The taxman says in court papers that the tax refund racket is wide and elaborate, and may have cost the Exchequer more than Sh7 billion.
“That the respondent conducted investigations and unearthed a major tax evasion scheme by the specific companies,” says KRA in response to the companies’ suit.
KRA made the revelations in response to a petition filed by 23 companies and their directors challenging the taxman’s demand that they pay millions of shillings in lieu of taxes owed. The taxman is seeking to recover about Sh300 million from the small and medium-sized companies.
On Monday, the companies rushed to court accusing KRA of demanding release of the disputed amounts from their bank accounts despite a court order barring it from making such demands.
Crescent Tech, one of the companies that have sued KRA, said the taxman had on September 17 directed its bankers to pay out Sh17.4 million within 14 days, a move it says is in contempt of court.
KRA claims that the tax evasion racket starts with registration of companies and the issuance of a tax PIN. It says the companies, which do not conduct any genuine business or deal in any goods, then start printing and selling Electronic Tax Register (ETR) invoices without actual supplies.= The fake invoices are then sold to other entities, which use them to support fake purchases in order to reduce taxes payable.= The taxman, for instance, accuses Hall Thermotank Equatorial of using such invoices from 21 different companies between November 2015 and February 2017 to account for expenses and reducing its tax obligations by Sh56.3 million. Shanir Distributors is accused of using similar tactics to evade Sh3.5 million, Spectre Chemicals (Sh16 million), Sriman Trading (Sh44.5 million) and Transpacific Limited (Sh16.8 million).
KRA has rejected Hall Thermotank Equatorial director Sivathani Sivaraj’ s claim that the taxman is targeting businesses operated by people of Asian descent, arguing that the assertions are only meant to sensationalise the matter.
The companies, however, insist that they have paid all their taxes and that KRA has not granted them the right to be heard and is taking arbitrary actions, including freezing their accounts.
Two businessmen were in April charged in court with evading Sh7 billion tax obligations — the largest such case in Kenya. KRA accused the businessmen of using fictitious invoicing in excess of Sh15, 369,511,856 to execute their scheme.
KRA said it had carried out a sting operation in the residences of the two suspects and confiscated crucial documents and electronic devices, including 10 ETR machines. At the time, KRA said it was investigating 66 missing traders and more than 2,000 beneficiaries of the scheme.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.