Kenyan company fined for elaborate tax avoidance scheme routed through Mauritius

A Kenyan real estate firm linked to the Chinese government has evaded tens of millions of dollars in taxes by providing bogus loans and “fictitious” imports to companies in Mauritius, one of Africa’s most notorious tax havens, according to an audit of the Kenyan government.

Afrigo Development Co. Ltd. concealed more than $200 million with the help of bankers and other professionals, the Kenya Revenue Authority found in the 2021 audit. “The money is earned in Kenya and funneled through a series of entities and of phantom transactions,” the tax office wrote, accusing Afrigo Development Co. Ltd. to make payments via Mauritius “in the hope that the money will be laundered”. In total, the tax office fined Afrigo more than $24 million in taxes and penalties.

The audit and other documents were obtained by the International Consortium of Investigative Journalists, which in 2019 published the Mauritius Leaks investigation, revealing how the island nation of 1.2 million people spent years attract companies with activities in Africa who wish to pay less tax to some of them. the poorest countries in the world.

“This case clearly illustrates that Mauritius has established itself as a hub for the flow of illicit money from African countries,” said Alvin Mosioma, Executive Director of Tax Justice Network Africa.

Afrigo did not respond to requests for comment. As of last month, the company had failed to pay the taxes and penalties, according to correspondence seen by the ICIJ which described the amount as “overdue”.

In 2017, Afrigo won permission to build a shopping and dining complex on the outskirts of Kenya’s capital, Nairobi. The development, which sits next to a donkey sanctuary, includes a conference hall, basketball court and green spaces, according to Environmental Impact Evaluation.

In 2018, a local neighborhood association failed to stop development in court, arguing Kenya’s environmental agency approved the project in secret. Development continued despite a separate judge in 2021 discovery the development and others nearby “have harmed the environment”.

Shell companies, fictitious payments and “disreputable professionals”

Last December, the KRA completed its investigation of Afrigo, identifying four suspicious companies in Mauritius with no apparent employees or permanent office addresses. One business, the tax office said, was quickly closed “after realizing its intention to embezzle money from Kenya”.

The four companies identified by the Kenyan tax office appoint Beijing resident Guo Quing as a director, according to the Mauritian public. recordings. A person with that name is the deputy general manager of a major railway project in Kenya being built by China Communications Constructions Company, one of the world’s largest construction companies and owned by the Chinese government.

Over the years, the Kenya Revenue Authority found that CCCC paid over $205 million to Afrigo Development Co Ltd. and other related Mauritian companies in “simulated or misappropriated transactions” and “fictitious” imports.

Individual invoices seen by the ICIJ show that CCCC paid more than $8 million between 2018 and 2020 to front companies linked to Afrigo. The companies, which the KRA said had no “physical presence other than a postal address” in Mauritius, received millions of dollars in royalties and to produce studies on rail tunnels and concrete, according to the invoices.

CCCC, Guo Quing and representatives of Mauritian companies did not respond to requests for comment.

A 2021 Kenyan government audit describes entities incorporated in Mauritius that were involved in a complex tax avoidance scheme by Afrigo Development Limited.

In its audit, the Kenya Revenue Authority also targeted bankers and facilitators who helped Afrigo and other businesses create and profit from a legal front. Afrigo “orchestrated a scheme of tax avoidance by having opaque corporate structures facilitated and/or promoted by disreputable professionals, financial institutions and other surrogates by creating complex webs of legal structures,” the statement wrote. KRA.

One of the facilitators identified by the KRA was the Standard Chartered Bank in Mauritius, which operated bank accounts for the shell companies. Another was Kim Fat Ho Hong, the managing director of SCI Essell Associates, a Mauritius offshore company that served as the local representative for Afrigo and other companies.

Standard Chartered and Ho Fong did not respond to questions.

Kenya’s investigation into Afrigo comes as governments in Africa and elsewhere promise to further curb tax evasion. “We cannot…be complacent by not deploying our arsenal against tax abuses by Evitas entities,” the tax agency wrote, referring to one of the four Mauritian front companies.

Mauritius, which for years billed itself as the “gateway to Africa”, has long encouraged companies doing business in Africa to set up front companies on the island. Mauritius offers businesses secrecy, low tax rates and a network of bilateral treaties that critics say allow profitable businesses to avoid paying taxes in some of the world’s poorest countries. The Mauritian government denies that the island nation is a tax haven.

In 2019, following the ICIJ’s investigation into Mauritius leaks, Zambia, Senegal and Lesotho broke treaties with Mauritius, arguing that the agreements allowed companies to avoid paying taxes where the money was earned, benefiting from the low Mauritian tax rate. Senegal alone estimated that it had lost $257 million over 17 years due to tax evasion under the treaty with Mauritius.

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