Rich yet evading taxes? KRA could soon come knocking

Opulence speaks in loud tones. Like a Porsche or Rolls-Royce cruising the streets and introducing itself through customised number plates. Or a chopper tearing through the skies carrying someone who can afford to pay at least Sh100,000 per hour.

The rich are known for such displays. They patronise exclusive recreational spots where they indulge in Remy Martin, Chateau Margaux, Dom Perignon, Glenmorangie and other expensive drinks.

PRADA SHOES

Their children either study overseas or through a system that will take them overseas for tertiary education.

On clothing and accessories, they deal in brands like Franck Muller watches, Zegna and Canali suits, Prada shoes … the like.

At times, some run charitable organisations and request media coverage of their benevolence.

HIGH NET-WORTH

Others, mostly politicians, preserve their shows until an election is near. It is then that they let everyone know they have the heaviest money in town.

The conduct of such individuals is bound to come under increased scrutiny after President Uhuru Kenyatta Wednesday told the Kenya Revenue Authority (KRA) to keep an eye on high net-worth individuals whose lifestyles are not in tandem with the taxes they pay.

OUTWARD APPEARANCE

Mr Kenyatta said such people may be compelled to demonstrate how they got their wealth, and to prove that they pay their share of taxes.

After Mr Kenyatta’s directive, KRA’s commissioner for intelligence and strategic operations, Mr Githii Mburu, said it will not be business as usual for individuals who outwardly appear rich but there is little to show for it in terms of taxes remitted.

“We’ll go overdrive. The indications we’ve got is that we need to do more. Because, if you can see the economy, there are those people,” said Mr Mburu.

SIGNIFICANT NUMBER

According to a report released in July by AfrAsia Bank, there are approximately 148,000 high net-worth individuals in Africa, each with net assets of $1 million (Sh102 million) or more.

Kenya has a significant number of them, with another report from Wealth-X indicating that the number of Kenya’s ultra-rich, or people worth $30 million (Sh3 billion) or more, grew by 11.7 per cent last year.

While Wealth X report did not give the number of ultra-rich Kenyans, its figures are in line with other reports on the growing number of rich Kenyans. Knight Frank, in a recent report, said Kenya created 180 new dollar millionaires in 2017, increasing the number of people with net-worth of more than Sh500 million to 1,290.

DOLLAR MILLIONAIRES

The real estate firm said out of 1,290 dollar millionaires in Kenya, less than 10 have a net-worth of over Sh50 billion, while 90 were worth Sh5 billion and above.

Mr Mburu said his department, which has a team of about 100 investigators, is mandated with probing people’s sources of income and their expenditure against the tax remitted.

To make that possible, the department uses various databases, including bank statements, import records, motor vehicle registration details, Kenya Power details, water bills and many others.

HIRED HELICOPTERS

He added: “When we hear somebody has hired a helicopter, we follow it up. Our interest is: How was the helicopter or those assets acquired? Were they acquired from known sources of income?

Without naming particular individuals, he said KRA was probing a number of Kenyans.

“I’ve been seeing some of them in the papers, but I will not talk about them,” he said, citing confidentiality requirements.

INCREASED FOCUS

Because of capacity issues, Mr Mburu admitted that they have not been pursuing each and every tax evader. Kenya loses billions of shillings annually to tax evasion. It remains to be seen whether the increased focus on the super-rich will bear fruit.

The Tax Procedures Act says it is a crime for anyone to knowingly omit certain details when filing their tax returns.

“The sentence is about 10 years, or double the tax evaded, or both. It’s a serious crime,” he said.

TAX COMPLIANCE

With Mr Kenyatta’s directive, he said, the department will be more proactive in ensuring tax compliance.

“We must do more to ensure that everybody carries their own share of responsibility in terms of payment of taxes,” he said.

 The Tax Procedures Act says it is a crime for anyone to knowingly omit certain details when filing their tax returns. KRA acts by either suing the person or taking them to court for criminal trial.

“The sentence is about 10 years, or double the tax evaded, or both. It’s a serious crime,” he said.

DECLARED MONIES

To be on the safe side, Mr Mburu noted, high net-worth individuals should go to the KRA website and declare their wealth, as well as the taxes they paid for it.

“Be honest. Pay the tax and the liability accrued from the declared monies. Then, when you come to KRA, we will be lenient because you will have saved us time and resources,” he said.