KRA may have lost billions of shillings in Kemsa scandal

By , People Daily Digital
Thursday, February 18th, 2021 13:43 | 3 mins read
KRA headquarters. Photo/File

The taxman may have lost billions of shillings due to non-payment of taxes by majority of companies that supplied Covid-19 related materials to the Kenya Medical Supplies Authority (Kemsa).

Kenya Revenue Authority (KRA) Commissioner General Githii Mburu told members of the Public Investments Committee (PIC) of the National Assembly that a total 77 companies that supplied Covid-19 related materials to the troubled Kemsa did not pay any taxes.

Only 43 companies that supplied goods worth Sh1.96 billion paid taxes amounting to Sh324 million, said Mburu.

Asked by PIC chairman Abdulswamad Nassir to calculate the total amount of money which the companies failed to remit as taxes, Mburu said the taxman had started the process of computing the unpaid taxes, which, he said, could run into billions of shillings owing to the huge supplies involved.

“At the moment, KRA is following up on the payment of installment taxes for the taxpayers (companies) who qualify,” he said.

Tax exempt suppliers He said 21 companies declared supplies to Kemsa under exempt supplies, referring to items which are not subject to tax. He said two firms declared both VATable and exempt supplies.

Further, there were four companies whose information could not be retrieved because one did not have a PIN certificate while three are international firms and are yet to register for PIN in Kenya.

Mburu told the committee that KRA was following up on payment of installment taxes for the companies that qualify.

“In light of the information obtained from the report and the amounts involved, KRA is carrying out a compliance review with the possibility of in-depth audit,” Mburu said.

It also emerged that more than 60 per cent of the equipment supplied were sourced locally by the suppliers, despite being declared as imports.

Mburu told the committee that a preliminary analysis conducted by the authority on VAT returns of companies whose PINs were identifiable indicated that only 15 firms declared supplies to Kemsa under general VAT and paid taxes.

Among the companies that complied are Megascope Healthcare Limited which paid Sh52.7 million for goods worth Sh170.4 million and Angelica Medical Supplies Ltd which paid Sh61.8 million for goods valued at Sh173.5 million.

Others included Harleys Limited which paid Sh45.4 million for goods worth Sh559 million and Omaera Pharmaceuticals Ltd which paid Sh23.5 million for items valued at Sh107.3 million.

Mburu revealed that La Miguela Holdings Ltd which won a tender worth Sh160 million paid a paltry Sh2,600 as taxes. Items lying idle in warehouses Other poor performers were Purma Holdings Ltd which paid Sh2,319, Amara BB Ltd (Sh25,330), Bio-Zeq Kenya Ltd (Sh51,000), China Railway No. 10 Engineering Group Company (Sh100,000).

A special audit conducted by the Auditor General showed Sh2.3 billion was lost in the Covid-19 items procurement scandal at Kemsa. Auditor General Nancy Gathangu indicted the management of Kemsa for violating various laws leading to loss of public money.

The report also revealed fraud in procurement and collusion between Kemsa bosses and companies that were awarded the multi-billion shilling contracts. According to the auditor, Kemsa overprocured items, which are still lying idle in its warehouses.

If the items are sold at the current market prices, Kemsa will only recover Sh4 billion, leading to a loss of a whopping Sh2.3 billion. The report shows that Kemsa irregularly diverted money meant for the Universal Health Care programme to purchase Covid-19 items without approval of the Ministry of Health.

“The procurement process was not initiated based on need assessment and planning resulting in over procurement of Covid-19 related stock worth Sh6.3 billion that is still being held at Kemsa warehouses.”

The government agency which oversees tenders now says the tenders were flawed. When appearing before the PIC, Public Procurement Regulatory Authority (PPRA) Director-General Maurice Juma said the tenders regarding Covid-19-related medical supplies could not be saved in the eyes of law and procedure despite their emergency nature.

The official also noted that the procurement process was shrouded in mystery, as Kemsa is yet to provide details of some 23 companies that benefited from the tenders.

“There is need for an investigation into the remaining 23 Covid-19-related tenders, which were not submitted by Kemsa to PPRA,” Juma said in a report.

The report also showed most of the contracts were signed after deliveries and there was no evidence of publications and reporting of the contracts.

The report said members of the inspection and acceptance committee revealed that the inspection of the deliveries was conducted after the retrospective procurement process was completed.

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