Taxman wins KSH.9Billion tax evasion case against wholesaler


Kenya Revenue Authority (KRA) is set to receive Sh9 billion from a wholesaler in tax arrears following an audit of its accounts by the tax appeals tribunal.

Paleah Stores Limited, a wholesaler dealing in construction materials and food, ended up with huge tax debts after statements by its bankers and suppliers gave it away.

The firm battled Kenya Revenue Authority before the tax appeals tribunal but eventually its case was dismissed.

The tribunal ordered it to pay 1.3 billion shillings corporation tax and 7.8 billion shillings Value Added Tax (VAT).

“We find the appellant (Paleah) has failed to make a case against the respondent on account of the alleged unfairness. The appellant was afforded an opportunity to present its case through the various meetings with the respondent.The respondent’s objection decision dated March 29, 2017, with the revised tax payable for the years 2008 to 2014 of Sh1.3 billion and Sh7.8 billion being corporation tax and VAT respectively, comprising of principal tax, penalties and interest is hereby upheld,” ruled the tax tribunal.

Back in 2016, Paleah was asked by KRA to submit all its purchase documents and bank statements to enable the taxman to conduct audits on how much the wholesaler had paid as taxes. KRA also demanded the wholesaler to pay Sh250 million which was to cover VAT tax liability for 2008 to 2012.

However, the wholesaler did not provide the documents. Following Paleah’s failure to file all the documents requested, KRA went after its bankers and suppliers.

After conducting proper analysis, KRA charged the wholesaler with a 3.9 billion shillings tax bill.

KRA demanded 973 million shillings corporation tax for 2008 to 2014, 2.9 billion shillings VAT for the same period and 5.1 million shillings Pay as You Earn (PAYE) deducted from its employees.

The taxman told the court that it issued Paleah with more than 9 billion shillings tax bill after conducting analysis of all the documents supplied to it.

Paleah appealead the decesion, arguing that it was a victim of bad professional advice as its tax returns did not reflect the real position of its operations for the years under scrutiny.

The wholesaler argued that based on its analysis, KRA ought to have demanded 34 million shillings for the period between 2008 and 2014.

It claimed that its cost of operation for that period was 1.5 billion shillings while KRA computed Sh136 billion.

“It is the appellant’s contention that a person or business entity conducting business is entitled to deduct all operations expenses incurred during the period under review,” it argued.

Paleah insisted that KRA tabulated VAT without involving it, adding that the tax liability probe was illegal.

The wholesaler urged the tribunal to set aside the analysis. In its response, KRA told the tribunal that Paleah had under-declared its profits for the investigation period.

At the same time, KRA argued that although Paleah had claimed that it paid its suppliers more than 3.2billion shillings as VAT, it ought to have paid 7.8 billion shillings to the taxman, including penalty and interest.

“The respondent carried out proper and credible investigations and the resultant assessments were issued in accordance with the applicable laws. The introduction of additional documents by the appellant at the hearing of the appeal is an abuse of the court process,” KRA replied.