Former presidential aspirant Peter Kenneth and three companies, including a bank, are the latest high-profile individuals and entities to be caught up in the ongoing tax crackdown by the Kenya Revenue Authority (KRA).

The The Statesman BusinessWeek has established that the Kenya Revenue Authority (KRA) is demanding more than Sh1.14 billion from shareholders of three companies, including Mr Kenneth, for underpayment of tax paid on sale of shares.

According to the KRA, these shareholders paid a total of Sh569.9 million for the sale of their shares instead of Sh1.7 billion, an internal document seen by the Business Daily shows.

The taxman reckons that these individuals and companies— including 37 shareholders of Mayfair Bank— filed capital gains tax (CGT) returns for transfer of shares in December 2022 for transactions that were finalised in 2023, therefore underdeclaring the taxes.

By end of December last year, sale of unquoted shares, property, as well as intangible assets such as software and business goodwill attracted a lower CGT of 5.0 percent.

However, this was tripled to 15 percent effective January as the government goes after the booming property market and the flurry of mergers and acquisitions.

The KRA maintains that these taxpayers disposed of their shares in the three companies that paid CGT tax in December last year for deals that had been completed this year.

“A transfer occurs when property is sold, exchanged, conveyed or disposed of in any manner. The due date (tax point) for capital gains is upon registration of the transfer instrument in favour of the transferee,” says the letter.

“Analysis of CGT data revealed that some taxpayers fraudulently filed CGT returns for transfer of shares in December 2022, before the actual transactions had taken place, with an aim of paying CGT at five percent therefore evading payment of CGT at 15 percent (effective 1st January 2023).”

Trouble for Mr Kenneth and 36 other directors in Mayfair Bank started when they went to pay taxes after the sale of their stake in the bank.

The sale of the final 49 percent stake in Mayfair CIB Bank to Egypt’s Commercial International Bank, KRA noted, was finalised on January 31.

Shareholders who sold their remaining stakes in Mayfair to CIB, including Mr Kenneth, lawyer Ambrose Rachier and city tycoon Amos Gichuki Ngonjo, the taxman notes, paid CGT amounting to Sh139.95 million instead of Sh419.9 million.

The KRA is demanding Sh279.97 million from Mayfair shareholders who pocketed a total of $40 million (Sh5.75 billion) for the sale of their remaining stakes in the small lender to CIB.

When contacted, Mr Kenneth said that the shareholders and the KRA had since agreed on a payment plan to settle the tax liability, and that they already paid the first instalment.

The shareholders have reportedly agreed with the KRA to pay the arrears in six instalments. Mr Kenneth insisted that there was no malice on their part when they paid for CGT last year.

“This is a question of, if I sell you my car, you pay me, I give you the logbook, you don’t transfer,” said Mr Kenneth, adding that it is CIB that delayed to transfer after they handed over the documents before the end of the year.

“But me I have finished with you. You have paid me, then you don’t transfer, then you go and crash somebody then people say the car is still in my name.”

He said that the deal was above board and blamed their situation on delays on the side of the buyer to finalise the deal before the new tax kicked in.

Deals that have come under the KRA’s radar include acquisition of a majority stake in Harley’s Ltd by the Mauritian conglomerate IBL Group.

The taxman is demanding Sh520.5 million from shareholders of Nairobi-based pharmaceuticals distributor with the transaction having been completed on February 13.

The taxman says these shareholders paid CGT of Sh260.2 million instead of Sh780.7 million.

The KRA is also demanding Sh339.4 million in unpaid CGT following the acquisition of IX Africa Data Centre Limited, a technology firm that offers data centre facilities.

The shares were bought by Lion Investment Bidco Limited (Lion), an investment firm that is registered in Kenya.

IX Africa shareholders, the KRA says, paid CGT of Sh169.7 million instead of Sh509 million after backdating the transaction date.

Representatives of the other two companies had not responded to our queries by the time of going to press.

Capital gains tax, which Kenya dropped in the mid-1980s to attract investments, is the levy investors pay on the profits — or gain — made when they sell, give away or dispose of an asset, such as shares or property like homes and land.

In a bid to mobilise more domestic revenues from the booming property market as well as a flurry of mergers and acquisitions, the government in the Finance Act 2022 tripled CGT to 15 percent.

However, it was not until January this year that the new rate became effective.

The KRA has lately been digging deeper looking for tax cheats as the Ruto administration tries to mobilise domestic resources and wean itself from borrowing.

The authority is also seeking Sh1.79 billion in taxes from Naivas, reportedly accruing from the 31.5 percent stake sale in the top supermarkets chain in 2020.