The High Court has allowed EACC to investigate Tatu City over tax evasion and money laundering.
The
Ethics and Anti-Corruption Commission (EACC) has been given permission by the
High Court to investigate the multibillion-shilling Tatu City real estate
project in Kiambu for allegations of tax evasion and money laundering.
Justice
Esther Maina gave her approval, stating that the anti-corruption agency has the
authority to investigate the crimes.
According to the EACC, Tatu City was involved in a loan back scheme, which is a type of
money laundering.
Tax evasion and money laundering, according to the report, are carried out through
paper transactions involving a web of interconnected companies, nominee
shareholders, and ostensibly loan and financing structures.
For example, a sister company, Kofinaf, incorporates special purpose vehicles like
Purple Saturn Properties, with shareholding and directorships held by its
nominees solely for the purpose of holding land parcels.
It then enters into sales agreements with SPVs, ostensibly advancing them loans—in
effect, Kofinaf funds its SPVs to fund its own properties. “It
is my conclusion that the issues under investigation in this case go beyond the
dispute between the individual shareholders and the petitioners because they
revolve around the commission of tax evasion and money laundering
offenses,” the judge said.
EACC goes after lands ministry employee for unexplained Ksh1.2 Billion
The suit was filed in 2019 by Tatu City and Kofinaf Company, seeking to overturn
letters sent to the Lands PS requesting the State to place a caveat or purchase
warning on 33 parcels of land.
Survey plans, maps, valuation reports, and official searches were among the documents
sought by EACC from the government.
However, Tatu claims that the EACC lacks the authority to order the issuance of caveats
in tax disputes or to investigate allegations of money laundering. The
companies argued that non-payment of taxes is a civil matter that does not fall
under the jurisdiction of the EACC.
The commission began its investigation by accusing Tatu City of undervaluing
property that is later transferred to related firms in order to pay lower stamp
duty, which is a tax equal to 2% of the land transfer value.
The land parcels were later transferred as shares to newly formed
foreign-registered companies, with the non-Kenyan company selling the plot at
market value in Kenya, avoiding stamp duty because it was not listed in
Nairobi.
According to the EACC, the chain of land sale transactions and corporate special vehicle
created were designed to separate, screen, and conceal the real owners’ control
over the funds generated from the property deals.
According to EACC, some of the companies involved were registered in Mauritius and were
used to avoid paying KRA taxes.
Read full story here.