Report shows Kenya is the first country globally to conduct tax evasion vulnerability
Kenya is the first country globally to conduct tax evasion vulnerability, report on the National Risk Assessment on Money Laundering and Terrorism Financing has shown.
The Director-General and Chief Executive Officer (CEO) of Financial Reporting Centre, Saitoti Maika noted that money laundering remains a significant concern for Kenya as it facilitates and conceals crime and can distort markets and the broader financial system.
“We were the first country to carry tax evasion vulnerability in the world. We are sure the rest of the world will learn from us now we carried out our risk assessment,” he said.
In 2021, the Kenya Revenue Authority (KRA) had reported 1,058 enterprises and people for suspected tax evasion totalling Sh132 billion, more than fourfold the decade-long yearly average.
Between 2012 and June 2020, the number of taxpayers under the KRA’s radar for failing to pay their taxes nearly twice the average 529 tax evasion schemes uncovered yearly by the agency’s intelligence unit.
Other strategies include employers understating salaried employees and remitting partial salary as allowances to reduce taxation as a result of importers sneaking in products.
The taxman, who has struggled to reach the Treasury’s collection goals over the years, attributed the increase in suspected tax evasion schemes to greater information sharing between its detectives and those linked to other enforcement and intelligence organizations.
The National Intelligence Service (NIS), Directorate of Criminal Investigations, Financial Reporting Centre, Ethics and Anti-Corruption Commission, and Office of the Director of Public Prosecutions are part of the multi-agency task force, which has a structure for sharing information.
“Those are partners that give us information whenever they are investigating a case where financials are involved, some people have made it their business model where tax evasion is part of their profitability. Those are the people we call hardcore tax evaders,” said Saidimu.
Between July 2020 and May 2021, 682 individuals and businesses were identified for probable tax evasion due to errors that cost the taxman Sh63 billion.
This is roughly five times the Sh10.63 billion average identified in 3,151 cases from 2012 to June 2020. The remaining 376 cases, totalling Sh69 billion in tax evasion, comprise “hardcore” tax evaders who “deliberately” avoided their duties.
