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Theories of Tax Fraud: A Kenyan Legal Perspective

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 Tax fraud remains a persistent challenge for revenue authorities worldwide, and Kenya is no exception. In Kenya, tax fraud encompasses intentional acts to evade tax liabilities, misrepresent financial affairs, and manipulate records to unlawfully reduce tax obligations contrary to the Tax Procedures Act (TPA) 2015 , the Income Tax Act (ITA) Cap. 470 , and the Value Added Tax Act (VATA) Cap. 476 . Understanding the underlying motivations and pathways to tax fraud is central to designing effective compliance interventions. Three foundational theories—the Fraud Triangle Theory (FTT) , Fraud Diamond Theory (FDT) , and the Fraud Pentagon Theory (FPT) —offer analytical lenses for scholars and practitioners alike. 1. Fraud Triangle Theory (FTT) First articulated by Donald Cressey, the Fraud Triangle Theory posits that fraud occurs when three elements converge: pressure , opportunity , and rationalization . In the Kenyan tax context: Pressure often arises from financial str...
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The Del Monte Kenya Tax Case: Key Insights from a Sh6.76 Billion Transfer Pricing Dispute

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The Del Monte Kenya Limited tax dispute has become one of the most consequential transfer pricing cases in Kenya’s recent history. While public attention initially focused on a Sh1.76 billion assessment, the case in fact exposes a total tax risk of approximately Sh6.76 billion, arising from multi-year transfer pricing audits by the Kenya Revenue Authority (KRA). Beyond the headlines, this case offers important lessons for multinational enterprises operating in Kenya. 1. Understanding the Full Sh6.76 Billion Exposure The Del Monte case is not a single-year dispute. It comprises two separate but related tax assessments arising from similar transfer pricing issues applied across multiple years: Sh1.76 billion – relating to the 2018 year of income, which was the primary subject of the Tax Appeals Tribunal (TAT) decision. Sh4.959 billion – relating to the 2019–2021 years of income, arising from follow-up assessments based on the same pricing model. When co...
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Opening Up the Cargo Tracker Seal Market: What KRA’s New Move Means for Importers and Transporters

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  The Kenya Revenue Authority (KRA) has announced a significant policy shift in the management of electronic cargo tracking seals, opening the market to multiple vendors and allowing traders and transporters to use approved, user-owned devices. This move marks a departure from the long-standing single-vendor procurement model and signals a broader push towards efficiency, competition, and modernization of customs controls. What Has Changed? KRA has now adopted a multi-vendor, user-owned model, under which: Multiple suppliers can provide electronic cargo tracking seals, subject to KRA approval. Transporters and traders may procure and use their own compliant tracking devices. KRA will continue to monitor cargo centrally through its customs systems, ensuring security and compliance standards are maintained. All approved devices must meet strict technical and security specifications, including tamper detection and real-time data transmission to KRA syst...
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