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Car importers on the spot over tax evasion

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Car importsBy Steve Umidha
The Kenya Revenue Authority (KRA)has raised an alarm over over an increasing number of tax cheats in the lucrative auto industry.

The taxman will now target the motor trade as part of a national programme to clamp down on tax evasion.
KRA confirmed it has set up a taskforce made up of its Customs and Border Control unit in collaboration with International Police (Interpol) and Kenya Bureau of Standards (Kebs) as well as tax inspectors to monitor customs dodging in the auto industry – confirming that it has received tip-offs which it will investigate.
Mr Julius Musyoki, a commissioner at KRA’s Customs and Border Control unit said the authority will target unscrupulous motor dealers that have been disguising their container loaded vehicle imports as household goods in a desperate bid to evade the applicable customs duty and related taxes.
“We have commenced the implementation of a number of revenue enhancement programmes particularly on the customs and border control front where large cash transactions is prevalent in the franchised sector where these dealers have been using to steal from tax payers,” said Musyoki.
He made the remarks while announcing what the tax body termed as a ‘breakthrough’ in its efforts to enhance customs revenue collection, with the interception of a cargo container loaded with three range rover vehicles believed to have been stolen and shipped in at the Mombasa Port from the UK and disguised as household goods.
The vehicles are valued at a market price of Sh28million and had been declared as baby car seats, bed sofas, toys and handbags.
According to KRA, the items would have attracted less than Sh1million customs duty and related taxes, effectively denying the authority more than Sh19million in customs duty chargeable for such high-end vehicles.
Kenya loses an estimated Sh639billion yearly in tax evasion mainly by multinational corporations, according to a report by the Tax Justice Network – Africa (TJN-A), an affiliate of the African Union – and statistics further show that only Sh146billion were traced between 2002 and 2011 from multinational companies – and the vice is believed to be rampant among independent importers.
KRA has been under pressure in the recent weeks as cash crunch hit key government agencies with blame shifted to the taxman after tax revenues fell below targets in the first three months of the fiscal year that began in July, plunging the ex-chequer into a cash crisis.
KRA collected Sh152.7billion in the first two months of the financial year against Sh210billion that was collected in the first two months of the previous year. The taxman has an annual tax target of Sh1.2trillion this year and failure to hit the number means the government will be inclined into increasing its borrowing plan- at a high cost.
Further, Excise Duty Act which took effect yesterday is expected boost KRA’s revenue collection in which the government hopes the new law will help the tax body to raise Sh28.44billion to bridge the budget deficit. Second-hand car imports and motorcycles among other items will rise as a result.

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