KRA Loses a Tax Claim Case Worth Ksh 1 Billon

The Kenya Revenue Authority (KRA) has lost a KSh1.1 billion tax claim against a Dubai firm, Geo-Chem Middle East.

The taxman is accused of misleading the court while presenting a case to claim Ksh 1.1 billion worth of tax from Geo-Chem Middle East which has his parent company in Dubai. The firm mainly deals with the inspection and testing of petroleum products.

In 2009, the firm had entered into a contract agreement with Kebs for inspection of imported petroleum products ending the previous practice of letting oil marketers vouch for the quality of their products through self-regulation. The contract was however suspended in March 2010 after petroleum dealers raised pump prices by Sh3 per litre to cover the inspection fee which fell on them.

This suspension led to the Geo-Chem company going to court and asking for compensation money on the basis of Kebs breaching the contract.  The Dubai firm won the case and was awarded $15.4 million (Sh1.6 billion) as compensation fees by Kebs.

However, right after the court awarded the Dubai-based company the money as a payout for the breach of contract, KRA on March 26 demanded Kebs preserve any funds due to the Geo Chem Middle East (Kenya) amounting to Sh1,085 billion until they were told otherwise.

Upon presenting the case to court, Geo-chem parent company had already rushed to court to prevent KRA from interfering and blocking the compensation money. The high court judge, Judge Alfred Mabeya during his ruling raised the question of why KRA chose to ask the Dubai firm’s local subsidiary instead of asking the parent company which is the one that had won the court case.

Judge Mabeya ruled that KRA “either intended to hide its actions from Geo-Chem Middle East and steal a match against it by seizing the latter’s funds and spirit the same away without the knowledge of the applicant or to mislead the Court.”

“A party who presents before court misleading material or deliberately misleads the court or presents information that it has reason to believe to be incorrect should be denied any favors by the court of law or equity. Such conduct amounts to abuse of the court process and must be discouraged,” he said.

By Joy Ngoiri