Former Nairobi Governor Dr Evans Kidero has been slapped with a tax demand of Ksh427,269,795 by the High Court.
According to a ruling by Justice David Majanja, an audit conducted by the Commissioner for Domestic Taxes (DTD) on the financial and business affairs of Dr Kidero did not show evidence that the disgraced governor used funds raised from friends for campaigns.
The former governor and the Commissioner had reached a consensus that funds raised for political party campaigns are not chargeable to tax. However, both parties failed to agree on whether Dr Kidero who was then vying for Nairobi gubernatorial seat had demonstrated the funds so raised had actually been expended in political campaigns.
“Audits carried out by the Commissioner established that the proceeds from fundraisers by the former governor were being deposited together with other business proceeds into his personal bank accounts. When tasked to avail a bank account for his campaign funds, Dr Kidero furnished the Commissioner with names of various contributors and a single-page document titled ‘Statement of Receipts and Expenditure’ indicating the monies received and expended on various items. Dissatisfied with this information, the Commissioner raised a tax assessment for Ksh427,269,795.00 that precipitated an appeal at the Tax Appeals Tribunal (TAT),” said KRA in a statement.
The Tribunal returned a verdict in favour of Dr Kidero holding that he had shown the source of the funds and that it was up to the Commissioner to establish if the funds had been utilised for the campaigns, thus shifting the burden of proof to the Commissioner.
“Before this court, the Commissioner’s case is that the Respondent did not provide the necessary documents to show that political campaign funds were separate from his personal account. It contends that in the absence of documentary evidence that the amounts in question were campaign funds and were used solely for the purpose of carrying out campaigns, it was entitled to treat this amount as income attributable to the Respondent hence taxable,” ruled Justice Majanja.
The Commissioner, aggrieved by the judgement of the Tribunal moved to the High Court on appeal challenging the holding by the Tribunal.
In his judgement, Justice Majanja faulted the Tribunal’s judgement and held that the burden of proof was on Dr Kidero to demonstrate that the funds raised for the campaigns were actually utilized for that purpose. This would not constitute taxable income. On the other hand, if the money was retained or diverted to his own personal use, it would be taxable income to him and liable to income tax.
Having failed to discharge this burden, the Court held in favour of the Commissioner and allowed KRA to proceed and recover the sum of Ksh427,269,795.00.
“In sum and for the reasons I have elucidated above, I agree with the Commissioner that the Respondent failed to discharge his burden as the evidence on record could not support the conclusions reached by the Tribunal. Consequently, the Tribunal erred in imposing on the Commissioner the burden of disproving the Respondent’s contention that the Ksh423,000,000.00 was election campaign contributions when he had not provided sufficient evidence to surmount his obligation to establish this source of income,” ruled the Judge.