Economy losing billions through false VAT claims

Written By: Judith Akolo
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KRA has already imposed Ksh 20,000 fine on any errant tax payer
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The Commissioner for Intelligence and Strategic Operations Githii Mburu at the Kenya Revenue Authority has warned traders against making false Value Added Tax(VAT) claims.

Githii who spoke at the second Training for the Africa Academy on Tax and Financial Crimes Investigation being held at the Kenya School of Monetary Studies said VAT fraud is one of the economic crimes noting that is one of the financial frauds denying Kenya much needed revenue.

The Commissioner however noted that most developing countries lack the capacity to address economic crimes, “especially tax fraud.”

Through capacity building of its criminal tax investigators, the tax body says it will be able to enhance revenue collection.

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Githii explained that VAT fraud manifests itself in many forms, and in Kenya it is mostly through, “manipulation of claims to create refunds,” he said and added, “this is seen through the ‘missing trader’ when a claim is made, yet there is no supplier,” said the Commissioner in charge of Intelligence and Strategic Operations.

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“People manufacture invoices to claim VAT for supplies that have not been done,” said Githii.

While saying Kenya and other developing countries are losing billions of shillings through false Value Added Tax claims, Githii said another form of fraud is manipulation of exports fraud in which traders pretend to have exported commodities and then make claims for VAT reimbursement.

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According to the African Union’s Advisory Board on Corruption, Africa loses over 50 billion US dollars through illicit financial flows through engagement in fraudulent schemes to avoid paying tax.

The board says African countries are losing in excess of US$50 billion to tax evasion mainly propagated by exporters who utilize tax exemption loopholes to claim VAT refunds they are not entitled to.

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The Kenya Revenue Authority(KRA) in conjunction with the Organization for Economic Co-operation and Development(OECD)’s International Academy for Tax Crime Investigation is training criminal tax investigators to be able to detect and investigate tax fraud.

Kenya is host to the second training that is also an opportunity to create closer border cooperation for countries in an effort to reduce tax evasion.

OECD Program Officer Juergen Leske says by training 12 countries in Africa, his organization will be able to create the much needed synergy to develop systems to help curb tax fraud.

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