Sunday, July 21, 2024

Land buyers lose millions in sham Ardhi House deals

Rampant fraud at the Ministry of Lands has left millions of property owners holding onto fake stamp duty and land rent receipts even as they remain unknowingly indebted to the government.

The real estate investors, whose number is yet to be determined, are keeping fake documents, mostly sourced from the notorious Nairobi River Road area, in the mistaken belief that they have paid the required levies to the taxman.

Kenya Revenue Authority (KRA), in collaboration with the Ministry of Lands, is dealing with 14 cases of large diversions of tax revenues worth millions of shillings.

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Stamp duty, which is payable to Commissioner of Domestic Taxes, is charged with the change in property ownership at the rate of between two and four per cent of the value of the transaction. The higher rate of taxation mostly applies to sale of land or building ownership in urban areas while land rent is paid for exclusive leases in towns.

A Nairobi-based lawyer, who worked with the Ministry of Lands, says the cartels have become particularly active in recent years as most leases granted by the colonial government at the beginning of the 20th Century come up for renewals.

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“In Nairobi people have been paying between Sh2 million to Sh3 million for lease renewals on expiry,” said the advocate, who cannot be named because of possible retribution from the Lands office for which he handles various transactions. Lands ministry and the taxman are digging up for information that can help unravel the multi-million shilling stamp duty racket known to be involving lawyers, law firm messengers, paralegal staff, bank and Lands officials.

The two government departments have more recently agreed to conduct a forensic audit of past transactions as it becomes clear that the manual processing of payments has allowed lands officials to issue confirmation of levy payments to customers without the government getting a cent.

The extent of the fraud became clear in the past few months as stamp duty collection rose to nearly Sh8 billion with the automation of the land registry.

Three years ago, the taxman collected an average of Sh1 billion out of lands transactions annually.

Dorothy Angote, the permanent secretary in the Ministry of Lands, acknowledges high level fraud in land transactions but insists firm action is being taken against the suspected perpetrators.

Ms Angote told the Business Daily that the ministry has forwarded the relevant files to the Criminal Investigation Department (CID) in the hope of nailing the fraudsters.

“The racket is being run by people who could not be acting alone but with the help of accomplices in banks and law firms,” she said.  

The most common thread in the theft that is rampant at the lands office has involved transfer of cheques paid in by land buyers to transactions that are of similar values but not related to the payments.

When the fraudsters get a transaction cheque from a law firm, land company or individual, they sound off partners in the network to find a transaction of similar amount that is being paid for in cash.

“The cheque is presented for payment with documents for different transactions and with different parties as beneficiaries but of the same amount reflected on the cheque,” said KRA commissioner in charge of investigations Joseph Nduati.



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