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Kenya: Kshs. 30 Billion Recovered from Missing Trader Scheme

· 2 min read
Javier Morales
Fraud Risk Analyst

Nairobi, Kenya

The Kenya Revenue Authority (KRA) has successfully uncovered a massive tax fraud scheme known as the "Missing Trader Scheme," which has resulted in the recovery of over Kshs. 30 billion in lost revenue since 2015.

The Scheme​

Involving the issuance of fake invoices to evade taxes, this complex tax evasion scheme saw fraudsters registering fictitious firms and supplying non-existent products or using stolen identities to register companies and generate fake electronic tax invoices.

Major Cases​

One significant case involved a contractor, Mr. John, who had won a Kshs. 40 billion tender to construct a road. To reduce his income tax liability, he bought construction materials from unregistered traders and generated fake invoices worth Kshs. 5 billion. Due to KRA's advanced digital taxation systems like the Real Time Transit Monitoring system and the Electronic Cargo Tracking System, Mr. John was unable to beat the system.

Technological Investments​

KRA's investments in technology have significantly reduced opportunities for cargo dumping and diversion, which in turn has minimized tax evasion. Technologies such as:

  • The Real Time Transit Monitoring system
  • The Electronic Cargo Tracking System

These systems have been instrumental in curbing revenue leakages and improving revenue collections.

Fraudsters' Responses​

However, the fraudsters have been persistent in their evasion tactics. They have attempted to divert transit cargo back into the country after reaching the destination's entry points. To counteract this, KRA has intensified efforts to share information with revenue authorities in neighboring East African countries.

Importance of Information Sharing and Technology​

In a statement, KRA Commissioner-General, Mr. John Njiraini, said, "[The] findings increased the understanding of the importance of information sharing amongst different Revenue Authorities in East Africa Countries as stipulated under section 10 of EACCM Act 2004." The success of KRA's efforts against the Missing Trader Scheme underscores the significance of investment in technology and information sharing as crucial tools in combating tax evasion and ensuring equitable taxation.

Ongoing Fight Against Tax Evasion​

Despite the progress made, the battle against tax evasion continues. KRA has arrested several suspects and is seeking to recover the lost taxes. The revenue authority urges the public to report any suspicious tax evasion schemes to prevent further revenue losses.