Nairobi — The Kenya Revenue Authority (KRA) has launched investigations into more than 400 of its staff over suspected involvement in a multi-billion-shilling Value Added Tax (VAT) fraud scheme, amid a wider crackdown targeting illicit tax activities.
The probe follows the discovery of widespread abuse of the VAT system, particularly through fraudulent invoicing and non-remittance of tax, resulting in significant revenue losses.
KRA said disciplinary action, including dismissal, will be taken against any staff found culpable.
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In response, the tax authority has implemented reforms to tighten VAT administration, including reducing the number of officers authorized to approve VAT obligations from 645 to 170. This measure is aimed at curbing internal collusion.
"The authority is strengthening internal oversight and intensifying investigations into the missing trader scheme," a KRA spokesperson said.
"Over 4,400 suspected shell entities have been flagged."
Data from KRA shows that more than 2,000 of these firms issued invoices worth Sh19.7 billion but either failed to file VAT returns or filed nil returns between July 2024 and March 2025, potentially costing the exchequer over Sh2.1 billion.
A further 2,354 firms filed returns but did not remit taxes, adding another Sh2.5 billion in potential losses.
The missing trader scheme involves the registration of fictitious companies that issue fake VAT invoices to help other firms claim unwarranted tax deductions.
KRA is also reviewing the VAT status of over 90,000 entities, with 20,000 inactive taxpayers set for deregistration and others under assessment for dormancy.
The authority has introduced stricter VAT registration rules, including physical verification of business premises and enhanced due diligence for new applicants.
