On 20 November 2018, the High Court moved to preserve Housemart Company Ltd’s bank accounts after the Kenya Revenue Authority accused the Chinese-owned importer of evading taxes and laundering proceeds through a network of linked companies.
Lady Justice Hedwig Ong’udi issued orders freezing funds held by the company at Barclays Bank of Kenya, Standard Chartered Bank, NIC Bank and Bank of Africa. The restraint barred any release, transfer, payment or other dealings with the money while the tax dispute remained pending.
KRA told the court that Housemart, which operates from Mombasa Road and imports construction materials and household goods, had under-declared VAT on its products since 2010. The agency said the alleged tax loss had reached Sh2 billion, while preliminary investigations placed the disputed amount at Sh2,243,781,488 between 2015 and 2017.
In an affidavit, KRA forensic investigator Cyrell Wagunda said the agency received information in January that six companies had been registered and used to open bank accounts through which Housemart sales proceeds were allegedly diverted. The firms named in the court material were Colila Ltd, Akubi Ltd, Nkemm Ltd, Obest Ltd, Sunda Industrial Company Ltd and Wise Databank Ltd.
Wagunda said investigators found what they described as tax fraud and money laundering involving diversion of sales and the use of fictitious forms to claim VAT refunds. He also stated that employees or security groups contracted to transport cash totalling Sh4 billion were used to move the money before it was wired to another company in China without tax being declared.
According to the KRA official, Sh515 million was deposited to Colila Ltd, Akubi Limited received Sh241 million, and Wise Databank Limited received Sh3.5 billion between 2015 and 2017.
Housemart’s managing director, Ye Wei, was separately charged in a Nairobi court with three counts of tax evasion. He appeared at the Milimani Law Courts and was accused alongside others not before court of evading tax amounting to more than Ksh 800 million and failing to declare sales worth more than Ksh 3 billion.
Ye denied the charges. The court released him on a Ksh 2 million bond with a surety of a similar amount or, alternatively, a cash bail of Ksh 1 million. The matter was set for hearing on 21 November 2018.
The charge sheet said that between 1 January 2016 and 30 June 2017, Ye allegedly defaulted on income tax of Ksh 154,328,071 payable to the Commissioner of Domestic Taxes under the Tax Procedures Act. A second count alleged a default of Ksh 583,353,575 over the same period, while a third count put the defaulted income tax at Ksh 85,082,282 for the period between 1 January 2015 and 30 January 2017.
In a fourth count, he was accused of failing to declare sales amounting to Ksh 3,232,584,773 between 20 January 2016 and 20 December 2017, as required under the Value Added Tax framework.
A source familiar with the matter claimed that some KRA officials had been harassing the Chinese businessmen after they refused to pay a bribe, and that the dispute was later settled after money changed hands. That allegation was not independently verified in the source material.
Despite the allegations, Housemart Co Limited filed a consent with KRA at the High Court. Justice Paul Nyamweya adopted the consent as an order of the court, vacated the temporary orders and marked the file as closed.
KRA also agreed to withdraw the preservation orders that had blocked the company from transacting on its bank accounts.
