Kenya loses Sh7.5bn in unpaid tax yearly
Kenya Revenue Authority (KRA) Commissioner General John Njiraini at a media briefing ahead of 2014 Taxpayers' Week on October 13, 2014. Kenya loses at least Sh7.5 billion annually in unpaid tax and other illicit financial flows, an advisory organisation says. PHOTO | DIANA NGILA |
What you need to know:
- The Illicit Financial Flows from Developing Countries: 2003-2012 survey lists Kenya at 121 among developing nations and 31 in sub-Saharan Africa.
- The low ranking by Kenya could also point to the fact that illicit money may actually be flowing into the country from other places.
- GFI findings show that in 2003, Kenya lost $277 million. The figure dropped to $80 million, a year after Mr Mwai Kibaki became president. But it rose again to $245 million and increased almost by $13 million to $258 million in 2007.
Kenya loses at least Sh7.5 billion annually in unpaid tax and other illicit financial flows, an advisory organisation says.
The Global Financial Integrity (GFI) notes that Kenya’s annual financial losses due to illegal or hidden pay outs could negate the benefits of development aid and foreign direct investment.
“If the problem of illicit financial flows is allowed to grow unchecked, development aid will continue to fight an uphill battle,” GFI warns in a report released Monday. The publication touches on financial details of 145 developing countries.
The Illicit Financial Flows from Developing Countries: 2003-2012 survey lists Kenya at 121 among developing nations and 31 in sub-Saharan Africa. The ranking results from tabulating figures on Kenya’s “outflows due to deliberate trade misinvoicing” and outflows due to leakages in the balance of payments “also known as hot money narrow outflows.”
ILLICIT MONEY
Trade misinvoicing is deliberate misreporting of the value of a transaction on an invoice submitted to customs. The Sh7.5 billion is derived only from available data from the World Bank and the International Monetary Fund.
“We choose to use published statistics, knowing that, while these provide an estimate of massive illicit flows, they still fall short of measuring all unrecorded financial flows,” observed GFI President Raymond Baker.
The low ranking by Kenya could also point to the fact that illicit money may actually be flowing into the country from other places.
In 2012 for example, three US economists accused Kenya of lax laws in demanding for the identity of companies seeking to incorporate in the country.
This, according to the economists’ Global Shell Games: Testing Money Launderer’s and Terrorists Financiers’ Access to Shell Companies report helps firms to operate anonymously and can serve as pathways to launder money.
GFI findings show that in 2003, Kenya lost $277 million. The figure dropped to $80 million, a year after Mr Mwai Kibaki became president. But it rose again to $245 million and increased almost by $13 million to $258 million in 2007.
BILLIONS LOST
By the turn of 2012, Kenya had lost a total of $860 million.
There were no figures for 2006 and from 2008 to 2011 although the authors of the report say it is because there was no readily available information on the same.
On the overall, an analysis of 145 countries over the years shows they lost $991.2 billion in 2012 alone from illegal transfers through anonymous companies, corruption, money laundering, tax dodging by multinationals and stuffing of money in tax havens.
The same countries received $89.7 billion worth of Official Development Assistance (ODA) meaning that for every dollar of aid sent to the developing world, $10 were sent out through illicit pay outs.
It is a consistent pattern since 2003 where they have received $809 billion in total ODA but lost $6.5 trillion through illegal means.
