Companies

KRA accuses Chinese firm of hiding cash in Hong Kong to evade tax

KRA

Taxpayers queue outside the Kenya Revenue Authority’s national tax support centre in Nairobi on June 30 to meet a deadline for submitting tax returns. PHOTO | SALATON NJAU

The Kenya Revenue Authority wants the High Court to freeze four bank accounts owned by Chinese phone maker X-Tigi on suspicion that the firm has been evading taxes and stashing proceeds from its business in Hong Kong.

The taxman says in court filings that X-Tigi has been grossly under declaring income tax due to the KRA from sales, and has not been remitting PAYE.

Detectives from the taxman’s office say they are investigating X-Tigi and its director Gao Fei— a Chinese national-—on tax evasion charges and may transfer all its funds held at four Equity Bank accounts.

Neither Mr Fei nor X-Tigi have responded to the suit. Justice Francis Tuiyott on Friday ordered that the KRA and X-Tigi seek a hearing date at the registry.

“Mr Fei has never filed returns or any taxes yet he earns income and runs a US dollar account with considerable deposits. There has been regular funds transfer to a bank account in Hong Kong suspected to be income derived from the business. The director and agents of X-Tigi are Chinese nationals hence there is a high risk of them leaving the country without payment of taxes found due after the assessment or frustrating the recovery of taxes,” says Asenath Obaga, a KRA investigator.

The taxman believes a probe on X-Tigi’s four bank accounts held at Equity Bank will help reveal just how much the firm owes in taxes.

“The information in the bank accounts referred to in the application herein will go a long way in assisting in the tax evasion investigation being undertaken by the KRA against X-Tigi and its directors,” the taxman adds.

KRA says it has studied X-Tigi’s imports and some of its sales which do not match the amount of taxes the Chinese firm has been declaring.

Documents filed in court by the taxman indicate that X-Tigi declared VAT of Sh627,576 between March and July this year, but imported goods worth Sh39.2 million in the same period.

A recommendation from the Investigation and Enforcement department of the KRA has been attached as evidence in which detectives say the firm’s sales are too low considering it is the sole distributor of X-Tigi phones in Kenya.

The taxman says that the only other alternative to freezing X-Tigi’s accounts is ordering the Chinese firm to deposit security in court that is equivalent to the amount that shall have been found to be due to the KRA.

New X-Tigi Technology Company was registered in Kenya on December 8 last year with its headquarters at Vision Plaza in Nairobi’s central business district.

Records that have also been attached as evidence in court show that it is the sole distributor of its mobile phone brand, chargers, covers and other accessories in the country. The firm is registered for Income Tax, VAT and PAYE.

The taxman says the only asset registered to Mr Fei is one car, a Toyota whose model has not been stated in court filings.

“It will be in the best interest of the public in ensuring that everybody pays his fair share of taxes if the court issues an order prohibiting the transfer, withdrawal, or disposal of or in any other dealing involving the funds in the accounts pending further orders of the court,” the KRA says.