The Kenya Revenue Authority has turned its guns on hundreds of Container Freight Stations (CFSs) on the Coast region as the crackdown on a suspected customs tax evasion network shifts to insiders.
The taxman this week summoned directors of 200 CFSs suspected to have conspired with its verification officers both at the port of Mombasa and at the document processing centre to pass entries that effectively denied the agency millions of shillings.
The CFSs are customs-bonded warehouses. Due to lack of container storage space, ships were forced to queue out at sea for indefinite periods of time while importers paid high ship delay surcharges. In fact, matters got so bad cargo entering Mombasa could take up to 10 days to clear – that the then Managing Director, Abdallah Mwaruwa, was sacked two years into his appointment.
It was in this context that a group of private investors proposed to the Kenya Ports Authority (KPA) that they provide storage units in order to ease the burden on the container terminal. Soon thereafter, Container Freight Stations (CFSs) – managed privately but licensed as sites for customs clearance by the Kenya Revenue Authority (KRA) – rapidly spread in and around Mombasa.
There are now more than 20 CFSs scattered throughout the town around which operates a ring of local powerbrokers and owners of extensive and commercially viable pieces of land in and around Mombasa. The CFSs have persisted and multiplied with the expansion of the port itself but ironically, they are threatened by the expansion in port infrastructure, in particular the SGR and its inland dry ports.
The nexus between political influence, land ownership and port business became clearer when services at the port almost ground to a halt in 2008 following the post-election violence that broke out that year.
From their inception, CFSs have been a source of aggravation for importers, shipping lines and the residents of Mombasa. The decentralisation of customs clearance to these facilities has caused problems of oversight, with accusations of corruption, including malpractice smuggling, mishandling of cargo, overloading and fraudulent documentation. Containers have been damaged and cargo has disappeared.Clearing is deliberately delayed in order to extract higher fees from importers, which increases consumer prices.
The suspicion that KRA insiders abet tax evasion has been rife even as the taxman has lately targeted similar crackdown on other sectors such as manufacturers, real estate investors, betting firms and retailers.
The first batch of CFS managers recorded statements in Nairobi on Monday, a screening exercise that continues up to Friday. But the CFSs directors have dismissed the probe and linked their woes to their opposition for Standard Gauge Railway (SGR) cargo order.
“We understand they summoned us because of our fight against SGR which has finished our business. Any other allegations of tax evasions are just fabricated,” said one of the affected directors who asked not to be named for fear of reprisals.
Last week, KRA Commissioner for Intelligence and Strategic Operations summoned the CFSs directors to Nairobi where they were asked to submit documents and details of their operations at the Director of Criminal Investigation Training College.
The documents included Memorandum of Association, copies of KRA registration licences, list of employees, associates and copies of port and airport passes.