Business

CitiBank On The Spot Over Sh127M Tax Evasion

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Kenya Revenue Authority (KRA) is embroiled in a court battle with Citibank over a Sh128-million tax demand on services offered to the United Nations. 

Court documents filed before the High Court show that KRA demanded the amount from Citibank Kenya on October 7, 2018. It included Sh73 million principal tax, Sh14.3 million as penalty and Sh40.7 million interest. 

The lender is a subsidiary of Citibank NA, based in the United States of America. 

According to court records, Citibank admitted owing KRA Sh608,317 and paid the amount immediately. It, however, contested Sh127 million, saying the amount was erroneously tabulated.

The bank also disputed the interest and penalty charged by KRA. It also faulted KRA for assessing Sh30 million excise duty on amounts charged by the lender to the United Nations and its agencies between January and July 2013. 

The dispute initially landed before the tax tribunal where Citibank asked the panel to quash the Sh127 million demand and compel KRA to refund Sh57.2 million duty paid from charges levied on the UN. 

The lender argued that KRA misapplied the 2013 Finance Act in its demand as the law could not be applied retrospectively. 

According to Citibank, KRA wrote to it in 2013 barring the lender from collecting excise duty from the global organisation and its agencies. 

A year later, the Ministry of Foreign Affairs informed the UN and other diplomatic missions that the government would refund all Railway Development Levy and excise duty they had paid to KRA. 

The tax tribunal, led by Mahat Somane, set aside the KRA demand and ordered it to refund Citibank Sh57.2 million. 

“The appellant has sufficiently demonstrated through evidence of payment that it erroneously paid excise duty of Sh57.9 million in respect to services to the UN for the period (between) August 1, 2013 and December 21, 2014,” ruled the tribunal. 

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KRA appealed the tribunal’s verdict at the High Court. In its 14-grounds appeal, the taxman argued that the tribunal went overboard by considering issues that had not been raised in Citibank’s objection. 

“The honourable tribunal erred in law and fact by making a determination on excise duty on fees charged to the United Nations and its agencies, an issue that was not raised in the protest,” KRA said. 

The tribunal also failed to factor in evidence contained in its documents and the testimony by its witness, the taxman said. 

KRA also said Citibank had no proof that it had erroneously paid the contested excise duty, and accused the tribunal of adopting a narrow interpretation of tax law. 

“The honourable tribunal misdirected itself in finding that the respondent had erroneously paid excise duty in respect of services to the United Nations without any evidence of the same,” the KRA appeal said. 

“The tribunal further erred in finding that the respondent ought to be refunded the same.”  

Meanwhile, KRA is also aggrieved about the tribunal’s verdict that it should not deduct commission income from excisable income earned by Citibank from a Kenya Pipeline Company syndicated loan. 

Court documents show that in 2015, Citibank earned Sh66.8 million commission and Sh58.4 million in 2016.


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