Kenya revenue authority watchdog has been tipped off an unprecedented operation of a new “super alliance” believed to exist between port officials and cargo cartels at the Mombasa port.
The powerful business conglomerates running Mombasa Container Terminals are now under KRA radar after it emerged that the importers have a new scheme that involves the importation of cargo with no intention to clear, but wait for them to be listed for auction and buy them at a price lower than the duty that was outstanding in the first place.
Industry members have expressed grave concerns over the potential cartel behaviour that is hurting trade further at a time when Kenya’s container port business is struggling in the face of competition from across the border.
Others are said to under-declare the goods before abandoning them, only to buy them back during the sale using different identities.
This deepens the tax bleeding in the scheme, which may be among the largest loopholes at the country’s entry point.
Last week, the Kenya Revenue Authority advertised several goods lined up for auction on May 15.
The cargo comprising close to 450 vehicles and several motorbikes was listed in a gazette notice complete with owners’ details and contacts.
Some of the listed owners, who agreed to talk anonymously, told the Sunday Nation that since the start of the crackdown on illicit imports, loopholes previously used to smuggle cargo have become rare, prompting errant traders back to the drawing board.
“Sometimes you import a car with a target client in mind but when the car lands here, you find the duty is way higher than you had envisioned. Without anywhere to sell, you leave it at the port, storage fees rise too high and your only other way out is to buy it at an auction like the one coming up,” a car dealer listed in the April 2019 action notice said.
In the scheme, some importers ship one-half of pairs of shoes before abandoning them to be auctioned as a useless commodity.
They then buy them at the auction before making another shipment of the other half of the pairs and matching them at a godown – effectively evading tax.
The vehicles listed in the auction include high-end brands such as Range Rovers, Toyota Land Cruisers and BMW X5s, signalling the tax value the unscrupulous traders may evade.
According to other traders, high duty bills came as a result of the March 2019 revision of the Current Retail Selling Price (CRSP), the value KRA uses to calculate custom duty for imported cars.
Apart from cars and motorcycles, KRA has also lined up for auction tens of 40-foot containers full of used clothing, cooking oil, molasses, gas cylinders, car parts and special vehicles like dump trucks.
Sources believe the goods may have been misbranded by cartels out to evade taxes. During the auction, the unscrupulous traders are said to be able to organise for the bids to land on the target buyers.
Fears have been raised that the alliance could make it even harder for his struggling industry.