Former Nairobi Governor Evans Kidero has suffered a major blow after the High Court ordered him to pay Ksh400 million tax to KRA after failing to prove how the funds in question were raised for his campaigns.
The order comes after Milimani Commercial High Court judge David Majanja overturned a decision by the Tax Appeals Tribunal dated March 6, 2017, that held that Kidero had shown the source of the Ksh400 Million and that it was up to the commissioner to establish if the funds had been utilized for the campaigns, thus shifting the burden of proof to the
commissioner.
The judge, while overturning the tribunal's decision, agreed with the KRA that Kidero failed to discharge his burden as the evidence on record could not support the conclusions reached by the Tribunal.
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"Consequently, the Tribunal erred in imposing on the Commissioner the burden of disproving the Respondent’s (Kidero) contention that the Ksh 423,000,000 was election campaign contributions when he had not provided sufficient evidence to surmount his obligation to establish this source of income," Justice Majanja ruled.
In his judgement, Majanja faulted the Tribunal’s judgement and held that the burden of proof was on 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 funds through Commissioner of Legal Services & Board Coordination," the Judge ruled.
The ruling in favour of KRA follows an audit conducted by the commissioner for Domestic Taxes (DTD) on the financial and business affairs of Kidero.
The Commissioner, aggrieved by the judgement of the Tribunal moved to the High Court on appeal challenging the holding by the Tribunal.
Despite the former governor and the commissioner reaching a consensus that funds raised for political party campaigns are not chargeable to tax, both parties failed to agree on whether 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, 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.
