20 September 2004

Kenya: KRA Should Be Arresting Looters of Public Funds Too


Nairobi — While financial scandals involving top government figures swirl around the Narc government, the Kenya Revenue Authority is preparing to prosecute half-a-million tax defaulters identified by their failure to submit 2002 income tax returns. The law allows the revenue authority to impose severe penalties, including prosecution and imprisonment upon conviction, on people who fail to declare taxable income.

But the revenue authority can only watch helplessly as ministers and permanent secretaries deny culpability even as the unfolding scandals point to their likely involvement. Even if such involvement is eventually proved, the revenue authority is still powerless to act against such government officials.

The irony of the revenue authority having powers to prosecute tax defaulters while lacking similar capacity to penalise ministers, permanent secretaries, state corporation chiefs and other government officials who misuse public funds, has been sharply brought into focus. How can the government's tax collection agency possess such awesome powers to inflict painful penalties on tax defaulters, even in the absence of prosecution, yet remain powerless to enforce lawful use of the tax revenues that it collects and hands over to the treasury?

Did parliament intend to condone the likely misuse of tax revenues by ministers, permanent secretaries and other public officials while making the payment of tax mandatory? If so, do Kenya's taxpayers believe this situation is equitable?

In other words, is there a case for parliament to give the revenue authority additional powers to oversee the lawful application of public funds and to investigate and prosecute public officials and others who misuse, embezzle, unlawfully benefit from or squander public funds through fraudulent procurement contracts?

While it can be argued that the function of auditing government expenditure belongs to the Controller and Auditor General, another irony crops up here. The Auditor General can recommend action be taken against government officials who misuse public funds but is powerless to take such action. Furthermore, the Auditor General reports to the Finance Minister who, in turn, reports to parliament.

In the event that the Auditor General finds the Finance Minister implicated in misuse of public funds, it is inconceivable that he would recommend action be taken against the minister. The requirement to report to the minister, therefore, renders the Auditor General powerless to exercise any effective sanction against government officers who misuse public funds. Even when he recommends action be taken, he has no power to enforce his recommendations.

In some countries, the Auditor General has powers to punish government officials implicated in the misuse of government funds. In the UK, for instance, the Auditor General can prosecute government officials. Typically, government officials in Britain dread being summoned to appear before the Auditor General.

In our example, the Auditor General's report, once laid before parliament, is reviewed by the Public Accounts Committee (PAC).

However, PAC is as hamstrung as the Auditor General. It can recommend adverse action be taken against public officials but is otherwise powerless to enforce such action. Even after such recommendations have been debated and adopted by parliament, the decision to prosecute can only be taken by the Attorney General.

Traditionally, the Attorney General has wide discretionary powers and can decide not to prosecute even after parliament has recommended that such action be taken. We are, therefore, left with nobody to exercise effective oversight over the proper use of public funds.

In the wake of the still unresolved Anglo Leasing scandal and the infamous Goldenberg scandal of more than 10 years ago, it is clear the public's trust may not always be well placed. The litany of fraudulent procurement contracts in many spheres of government and the various pending bills - many of questionable veracity - owed to "cowboy contractors" attest to the ease with which public funds can be misused or embezzled.

If the Public Audit Act does not empower the Auditor General to prosecute public officers when they misuse taxpayers' funds, and the proposed Government Financial Management Act, now before parliament, still vests such prosecutorial powers in the Attorney General, who should safeguard taxpayers' funds after the revenue authority hands over the funds to the Treasury?

Where there is strong evidence of wrongdoing, should it not be proper that the provider of the public funds - the revenue authority - be empowered to intervene and investigate who did what and, if justified, take the offending persons to court?

Following the Goldenberg and Anglo Leasing scandals, many taxpayers must be justifiably feeling that the obligation to pay taxes must be counterbalanced by a clear legal duty binding public officials to spend taxpayers' funds according to the budgeted purposes, with the emphasis being on prevention of wastage and fraud.

Would giving the revenue authority such powers then make it too powerful? Or should such powers be possessed by the Auditor General as is the case in Britain? And if not the Auditor General, who? The need to safeguard public funds from looters and embezzlers is clearly self-evident.

There is no doubt that Kenyans are living under the tyranny of official corruption with its most visible outcome being the impoverishment of the country.

Clearly, the time has come for us to demand enhanced protection of tax revenues after the revenue authority has handed such funds to the Treasury. Similar protection should be accorded to funds accruing to state corporations, whether derived directly from the Treasury or from any other sources.

And whether parliament gives such powers to the Auditor General or to the revenue authority, such protection should also be extended to public funds obtained from donors or development partners. In any case, when such funds are contributed by foreign governments, they are derived from tax revenues in the contributing countries.

When the funds have been borrowed from foreign institutions, the need to accord them the envisaged protection is even greater as the repayments will have to be shouldered by future generations of domestic taxpayers.

In the absence of such protection, Kenyan taxpayers will continue to be afflicted with Goldenberg-type scams. Senior government officials will continue to sign skewed procurement contracts which are only enforceable by the contracted suppliers but not by the government. Senior government officials will continue to use public funds to pay the contracted suppliers even when the contracts are clearly void or voidable. The Kenyan taxpayer will continue to be the loser.

Kamau Kaniaru is a regular contributor for The EastAfrican. E-Mail: kkaniaru202202 @ yahoo.com

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