The Saturday Standard can now reveal how a multi-billion shilling tax evasion racket within the Kenya Revenue Authority (KRA) was broken leading to yesterday’s arrest of dozens of the state body’s employees that saw panic sweep over most of the agency’s offices countrywide.
By the time we went to press, more than 40 individuals, including one senior manager, tens of supervisors and their juniors within the customs and domestic tax departments were in police custody. Many more were on the run and remained wanted by authorities in what could be the biggest corruption purge within a state organisation that could see numbers of those arrested reach 100.
For the employees, the day started like any other. But unknown to them, the results of an investigation that started some four months ago would confront them. No one knew what hit them and by the end of the day, the normalcy that they had enjoyed over the week would be shattered.
Four months ago, KRA put out a call for contracted workers who would be deployed to work within the numerous departments that dot the 38 floors of the authority’s headquarters. Hundreds of thousands of applicants responded to the call, but only 2,000 of them were cherry picked by the agency.
Investigators at the centre of yesterday’s raids told Saturday Standard that it is this pool of new recruits who helped bust the tax evasion racket wide open. The workers were more than that and doubled up as spies for not only their employer, but other investigative agencies as well.
An intimate information relaying system, sometimes as simple as word of mouth or a seemingly harmless phone call to their handlers or a forwarded mobile money transfer message was enough to tell on their colleagues.
The findings of these 2,000 individuals eventually led to arrests over allegations of abetting tax evasion in a morning raid by a multi-agency team at Times Towers. This comes at a time when the country’s tax collecting agency continues to fall below its annual collection projections.
Sources at KRA say those interdicted occupy supervisory positions in various departments and their immediate juniors. The arrests were confirmed by Directorate of Criminal Investigations boss George Kinoti, just a day after the official retirement day of the outgoing commissioner General John Njiraini.
“Following the KRA operation, out of a target of 75 suspects, 41 have been arrested, phones and other electronic gadgets they used to commit fraud and theft confiscated, servers linked to their communication seized for forensic analysis,” Kinoti said. “More arrests and recovery are anticipated.”
Those who witnessed the raid at Times Tower said a multi-agency task force swooped into Times Towers Friday morning, performing a floor-to-floor swoop targeted at the different persons of interest.
“They were also carrying away computer CPUs as well as their phones,” a KRA employee said.
According to our sources, some employees, fearing arrest, left the office and clocked in again in the afternoon only for them to be carted away in a second raid by the security agencies.
In a supporting affidavit filed by a DCI investigator seen by Saturday Standard, detectives are looking into allegations of tax evasion, money laundering, abuse of office, demanding and soliciting bribes and conspiracy to commit economic crimes.
Those arrested are thought to have been involved in the issuance of tax compliance certificates at a fee to individuals or corporations deep in tax arrears at a fee that is set at percentage of the amount owed to the government.
Often, this requires the collusion of someone from KRA’s investigations department, enforcement and another from the domestic tax department.
The clients who seek a clean tax bill of health fall in three categories as well.
There are walk-in clients who go to various KRA offices to know about their tax statuses. Upon realising the magnitude of the sum they owe the government in terms of back taxes, they are offered an easier, less costly solution to the problems facing them. They agree on a figure and their details are altered in the KRA Domestic Tax database.
For the bigger, longer cons, compliance officers at KRA dig into the tax histories of companies that have back taxes, often running into hundreds of millions.
An investigator and enforcement officer approach the company head with a bid to make the ‘small problem’ go away. After some money is paid, the company is declared healthy and given a tax clearance certificate. “A number of KRA staff have been colluding with certain tax payers in a criminal enterprise to evade payments of taxes or reduce liability, I direct the DCI to immediately launch investigations of both KRA staff and their co- conspirators,” Director of Public Prosecution Noordin Haji said in a statement.
“The criminal scheme has over a period of time occasioned a reduction in tax collection by KRA.”
Yesterday, Njiraini said they launched a crackdown on staff in relation to the practices in question, which include facilitation of irregular/fraudulent clearance of cargo and fraudulent amendment of tax returns so as to help taxpayers evade taxes and the irregular issuance of Tax Compliance Certificates.
“Investigations into the rackets have been in progress for the last four months, with covert assistance provided by national law enforcement agencies to help in trailing money and communication,” said Njiraini. Of those affected, 61 are from Domestic Taxes Department and 14 are from Customs and Border Control Department. The bulk of the cases (62) touch on staff based in Nairobi.
After the officers left Times Towers, it is believed they proceeded to various airports, where more arrests were made. As this happened though, staff remained grumpy over the operation.
“The Commissioner General is looking at a soft exit by creating the crisis,” another source said.
Although we could not independently verify these claims, a large number of current employees we spoke to shared similar opinions.
Our sources also intimated that most of those interdicted were let go of as a result of their mobile money transaction histories that linked their accounts to phone numbers of KRA customers.
“Some were fingered for receiving as little as Sh5,000 from people who are allegedly under investigation for tax evasion,” the source said. “We are not opposed to the arrests. We just want to see some fairness. DCI cannot tell us only juniors are culpable. Even the big boys are part of the mess.”
Njiraini said the officers affected have been detained for questioning and statement recording, prior to their arraignment in court within the month.
He said the failure to meet revenue targets has been as a result of malpractices engineered by his own staff.
Angered staff also blamed the bad blood between board chairman Francis Muthaura and Njiraini to the standoff at Times Towers.