Ruto’s directive on seizing property puts KRA in a precarious situation
Ruto's directive on seizing property puts KRA in a precarious situation as it is weakening KRA’s Tax Procedures Act
Ruto’s directive on seizing property puts KRA in a precarious situation as it is weakening KRA’s Tax Procedures Act.
Following President William Ruto’s order to the taxman to be cautious when issuing distress orders that cause asset seizures of suspected tax evaders, the Kenya Revenue Authority (KRA) is faced with a legal conundrum.
Dr. Ruto has requested that the KRA stop taking the property of alleged tax evaders and crippling businesses through forced occupations and bank account blockades.
This has essentially made it more difficult for the KRA to enforce some provisions of the Tax Procedures Act, particularly the distress order.
While a softer stance toward suspected cheats could encourage tax evasion and thwart efforts to increase tax collections from the current level of Sh2 trillion to Sh3 trillion in an economic environment where businesses are not expected to deliver outsized profits for taxation growth, going hard on tax cheats, especially closing businesses, in accordance with the law could draw the taxman into a conflict with the President.
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A tax cheat’s home or business may be forcibly occupied by the KRA under a distress order, and if the necessary taxes are not paid, the business’s property or its inventory may be put up for auction.
The Tax Procedures Act also allows the taxman to issue travel bans on suspected tax cheats, collect duty directly from suppliers and bankers of defaulters, and prosecute those in arrears.
Suspected tax cheats can have their assets seized and auctioned and their personal identification numbers (PINs) disabled.
“The Commissioner or an authorized officer, may issue an order (referred to as a “distress order”), in writing, for the recovery of an unpaid tax by distress and sale of the movable property of a taxpayer,” says the Act.
“When the taxpayer does not pay the tax liability described in the distress order, together with the costs of the distress… the property that is the subject of the distress order may be sold by public auction or private treaty as the Commissioner or authorized officer may direct.”
This is the law the KRA used in 2019 to close the Thika-based Africa Spirits Limited (ASL) over a Sh17 billion tax evasion claim.
The factory belonging to billionaire Humphrey Kariuki was reopened last week, just days after Dr. Ruto appointed the tycoon to head a powerful investment committee.
According to a report by businessdailyafrica, the thinking of President Ruto is that the KRA is better off agreeing to a repayment plan with firms owing tax rather than ordering their closure.
Analysts reckon that the order is a double-edged sword.
Keroche Breweries, which is co-owned by Tabitha Karanja, a Senator belonging to Dr. Ruto’s UDA party, has had its premises shut by the KRA multiple times for breach of tax arrears payments plans.
During his campaigns for the August 9 election, Dr. Ruto claimed that his close allies were targeted for political persecution or were being intimidated so that they could abandon him.
Corruption and tax suits against Dr. Ruto’s allies worth close to Sh30 billion have either been withdrawn or quashed in the recent past, turning the spotlight on the prosecution and investigative agencies in the fight against graft.
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