KRA summons activist Morara Kebaso over alleged Sh186 million tax evasion

The Kenya Revenue Authority (KRA) has summoned political activist Morara Kebaso over alleged tax evasion involving Sh186.3 million in revenue generated by his businesses over the past three years.

In a notice addressed to Kebaso, KRA listed five companies including Igrow Digital Enterprise, Morara Home Furniture, Luku Fashion, Morara Properties Limited (also operating as Blacksmith Morara Limited), and Backtent Security Limited—as entities under investigation.

The authority accuses these companies of “declaring nil income or failing to file tax returns despite ownership of properties, business ventures, and other assets.”

“The entities have been declaring nil income or not filing returns despite the fact of ownership

of properties, business undertakings and other assets,” read the notice dated January 6, 2024, and seen by the Eastleigh Voice.

According to KRA, further preliminary investigations highlighted three bank accounts tied to Morara Properties Limited, Morara Home Furniture, and Kebaso himself, asserting that these accounts have been actively receiving funds.

According to the taxman, deposits into the accounts, particularly from M-Pesa pay bill services, contradict the businesses’ failure to declare income.

“The account is registered under a business name Morara Properties registered BN-

35C6ZXZ2. The business name was registered on July 16, 2023. The nature of business is

real estate. The deposits in the account are majorly transfers from Mpesa paybill implying

they are of a business nature,” the taxman said in one of the accounts.

Another account, registered under a business name specialising in making and selling home furniture, was established on February 17, 2021. KRA states that the account has also recorded significant deposits, primarily from M-Pesa paybill transfers.

Similarly, the third account, registered under Kebaso’s individual name, is linked to the supply of furniture and interior fittings. Its deposits also predominantly consist of M-Pesa paybill transfers.

The taxman says further analysis of the accounts revealed trade credits amounting to Sh9.5 million in 2022, Sh31.9 million in 2023, and Sh144.9 million in 2024, totalling Sh186.3 million over three years. Of this, Morara Home Furniture accounted for Sh146.9 million, nearly 80 per cent of the total deposits.

“The trade credits were compared with Income Tax turnover declared in the income tax returns, to which it was noted you are a non-filer, to determine undeclared income turnover,” KRA said in its notice.

It also pointed out that Kebaso’s businesses are not registered for Value Added Tax (VAT), despite exceeding the mandatory registration threshold of Sh5 million in annual turnover.

As per Section 34 of the VAT Act, KRA indicated plans to forcibly register Kebaso’s businesses, calculating VAT dues of Sh25.7 million. Additionally, an estimated income tax of Sh1.4 million is owed for 2022 and 2023, based on a 12 per cent profit margin typical of furniture businesses. KRA noted that the income tax for 2024 is yet to be calculated.

In total, Kebaso is accused of owing Sh27 million in unpaid taxes, comprising Sh25.7 million in VAT and Sh1.37 million in income tax.

“It was noted that you are not registered for VAT. However, the determined turnover as per bank deposits is above the threshold of five million and therefore you are to be forcefully registered by the Commissioner under Section 34 (6 & 7) of the VAT Act. Your nature of business shows you deal in vatable items such as furniture and interior fittings,” KRA said.

The Authority further referenced records from the National Transport and Safety Authority (NTSA), which show that Kebaso owns six cars.

They include; the Renault Van model, Land Cruiser Pick Up, Land Cruiser Prado, Volkswagen Passat, Captain Tuk Tuk and TVS Motorcycle.

KRA said the assets are inconsistent with the activist’s claims of nil income. “The assets are owned despite the declaration of nil or non-filing of income.”

Kebaso has been summoned to KRA’s Nairobi offices on January 13, 2024, for an interview.

“You are hereby requested to provide copies of records, books of accounts, and other documents including general ledgers, asset registers, invoices, sales and purchase ledgers, payroll records, and bank statements for the entities and directors,” KRA said in the notice.

According to the Authority, Kebaso may have committed multiple tax-related offences in connection to alleged undeclared income and failure to meet tax obligations.

KRA outlined several possible breaches of the law, including failure to submit tax returns as stipulated under Section 94 of the Tax Procedures Act (TPA). This section states that any person who does not file tax returns by the due date commits an offence.

The authority further cited Section 97 of the TPA, which addresses fraud in relation to tax. Under this provision, a person is deemed to have committed an offence if they knowingly and deliberately default on any obligation imposed under tax laws.

Additionally, KRA flagged a potential violation of Section 37 of the Value Added Tax (VAT) Act, which relates to offences involving registration. The law requires individuals and businesses exceeding the VAT threshold to register.

Failure to do so attracts a penalty of up to Sh200,000, imprisonment for up to two years, or both upon conviction.