Revealed: UDA's tax evasion

Former United Democratic Alliance (UDA) Secretary General Cleophas Malala has sensationally placed President William Ruto’s party at the centre of a multi-million-shilling tax evasion scandal involving unremitted taxes.

Speaking exclusively to The Standard, Malala accused UDA of ignoring tax obligations, a claim which highlights alleged impunity and double standards by Ruto’s administration, which has essentially forced heavy taxes down the throats of Kenyans.

Among the unremitted dues, which Malala said had not been deducted from the salaries of UDA employees, include the income tax (Pay As You Earn), National Health Insurance Fund and now Social Health Authority and National Social Security Fund remittances, which he said had never been deducted since August 2022, when UDA first received its funding from the Political Parties Fund.

The most controversial of such deductions is the Housing Levy, which Ruto bulldozed through Parliament against the wishes of many Kenyans as it chipped away 1.5 per cent of their gross earnings.

“The point of departure between myself and the UDA party leadership arose when it became evident that there were deliberate efforts by the so-called ‘owners’ of the party to frustrate lawful financial reforms, particularly the payment of statutory deductions,” said Malala.

Kenya’s Income Tax Act requires employers to ="https://www.standardmedia.co.ke/politics/article/2001496432/uda-fights-expose-ruto-knack-for-combat-politics">deduct tax from employees< and remit the deductions to the Kenya Revenue Authority (KRA) before the ninth day of the following month.

The implication of the alleged scheme, according to Malala, is that his former party cheated Kenyans out of some “Sh6 to Sh7 million, monthly,” which translates to between Sh120 to Sh140 million since August 2022. UDA, Kenya’s largest political party by the number of elected national and county lawmakers, is heavily funded by the taxpayer.

Youth revolt

The party benefits the most from the Political Parties Fund, with its allocation in 2023/24 financial year being Sh576.8 million of the Sh1.36 billion shared among political parties. In the 2022/23 financial year, the party was allocated Sh345.8 million.

Ruto was adamant in pushing for the housing levy and hastily crafted a law that re-introduced it after the High Court found an initial one to have been illegal. The President is also big on raising taxes, arguing that it will reduce borrowing. Last year, tax hike proposals sparked a youth-led revolt that brought Ruto’s government to its knees.

The former Kakamega senator’s remarks came in the wake of accusations of financial impropriety against him by Kapseret MP Oscar Sudi.

In an interview circulated on social media, Sudi termed Malala “a thief”, accusing him of misusing campaign funds and withdrawing Sh5 million weekly from the party’s coffers.

Malala dismissed the claims as “baseless” and a “reckless attempt to tarnish my reputation” and threatened to sue Sudi for defamation.

He challenged the Kapseret MP to substantiate his claims.

“Let it be known that this response is not directed at Hon Sudi, for I do not engage in battles with messengers, but rather with those who send them. I chose to address this statement to the leadership of the UDA Party, the party of the President, where I dutifully served with commitment and integrity,” Malala introduced his statement.

While he stopped short of accusing Ruto of sanctioning the alleged tax evasion, Malala said the President was aware of the ="https://www.standardmedia.co.ke/politics/article/2001500122/uda-wrangles-cleophas-malala-ousted-as-secretary-general">unscrupulous dealings<, which he termed “deliberate,”  and did nothing about it.

The former senator said he had raised the subject in high-level meetings attended by the President, but his concerns were “brushed aside,” as evidenced by the fact that no remedial action was taken.

“For the record, I am in possession of memos, official letters, minutes of meetings, payroll documents and bank statements that fully support my position. I am also willing to provide UDA’s KRA PIN and facilitate verification through relevant government agencies.

“I have official advisories from the Registrar of Political Parties, Auditor General, Attorney General and Institute of Certified Public Accountant (s) of Kenya advising the party on proper financial management. Unfortunately, these were ignored by the party leadership, who chose to disregard lawful guidance and undermining accountability (sic.),” Malala went on.

The Standard could not verify Malala’s claims, which feature in a document he highlights as a complaint he filed at UDA’s dispute resolution committee last September after he was removed as secretary general in a morning meeting of the party’s top brass last August.

We have obtained the document, which contains affidavits, attached letters, transcripts of WhatsApp messages allegedly by UDA officials, and an alleged payroll of UDA employees, whose veracity The Standard could not independently vouch for.

Speaking to The Standard on Friday via phone, UDA’s Director of Communication, Rob Jillo, termed Malala’s allegations “ridiculous”. After we sent him specific claims made by Malala via WhatsApp he said he would offer an official response.

Jillo later said he did not want to be quoted and referred us to Secretary General Hassan Omar, the party’s official spokesperson, whom we unsuccessfully tried to reach on the phone. We sent Omar, an East African Legislative Assembly lawmaker, a request to respond to the specific claims.

One of Malala’s letters is an alleged internal memo to a top UDA official on the ="https://www.standardmedia.co.ke/politics/article/2001496312/violence-rocks-uda-polls-as-wrangles-choke-core-of-party#google_vignette">unfulfilled statutory deductions<, in which he says he would not “sign off on any payroll that does not include the appropriate statutory deductions.”

“It is imperative that we uphold our legal and ethical responsibilities by ensuring that these deductions are processed and remitted in a timely manner. Furthermore, I urge you to take immediate action to update all pending payments of statutory deductions,” the memo, dated “13th May 2014,” (years before UDA was founded) reads in part.

Mandatory signatory

In another letter allegedly written to a manager of one of Kenya’s banks, Malala laments about a change of bank signatories by the National Executive Committee, highlighting previous directives that made him an “optional” signatory and not a “mandatory” one. He said the changes were effected using forged minutes of a meeting of UDA’s top brass.

“The Secretary General is designated as the accounting officer of the party. Therefore, the Secretary General must be a mandatory signatory to all bank accounts of the party without exception,” Malala states in the letter dated June 25, 2024.

The Standard cannot determine whether the letters and memos attached are genuine or whether they were received by the party officials to whom they were directed. It is based on this that we decided to omit any specific names Malala mentioned.

Further, the purported payroll, which lists payments allegedly made to UDA’s employees, offers no breakdown of whether the amounts are the gross earnings of the said staff, which would corroborate the allegation that no statutory deductions were remitted.

One of the bank documents, the only one with some semblance of an official document, highlights a check payment of Sh3.9 million to some 18 persons, with another merely listing alleged payments.

Malala denied having benefited from the alleged tax-evasion scandal, saying he had never been on UDA’s payroll. He wants Kenyans to withhold taxes.

“It is unconscionable to demand sacrifice from ordinary citizens while those in power violate the very laws they impose. Those who have evaded tax must be held criminally liable without fear or favour,” he stated.