KRA loses Ksh.7 billion annually to hidden offshore accounts - report

The Kenya Revenue Authority (KRA) is estimated to lose about Ksh.7 billion ($62.9 million) annually in revenues hidden away as offshore wealth.

This is according to a new report dubbed the State of Tax Justice 2021 by the Global Alliance for Tax Justice in collaboration with the Tax Justice Network (TJN).

Cumulatively, the tax man is projected to lose Ksh.62.3 billion in revenues including Ksh.55.5 billion ($495.9 million) from the shifting of profits by multinational corporations (MNCs).

The loss in tax revenues has been compared to resources required to make 32.5 million full vaccinations which would represent the coverage of 66.2 per cent of Kenya’s population.

MNCs with operations in the country have been estimated to cart away Ksh.190.4 billion ($1.7 billion) worth of profits from the country.

Globally, an estimated Ksh.54.1 trillion ($483 billion) is said to be lost to cross-border tax abuse by the MNCs and individuals hiding assets and income streams offshore.

The amount which is equivalent to five times the size of the Kenyan economy is projected to fully fund the vaccination of the world’s entire population more than three times over.

Kenya’s most vulnerable channel for the losses has been deemed to be portfolio investments from where the United States, Luxembourg and Japan lead as the main sources of vulnerabilities.

The report states low income countries are adversely impacted by the revenue losses in contrast to their rich counterparties.

“Lower income countries face a deeply unfair situation. It seems that international rules and policies favour the profits of MNCs and their shareholders in rich countries,” stated UNAIDS Executive Director Winnie Byanyima.

The report has recommended the introduction of wealth taxes for rich individuals, excess profits taxes to MNCs who made a fortune during the pandemic and move rule making on international tax to the United Nations from the Organisation for Economic Co-operation and Development (OECD).

This is as the report fingers OECD countries of being culpable by holding the bulk of the hidden financial assets.

The Cayman Islands, United Kingdom, US, Luxembourg, Ireland, Netherlands, British Virgin Islands, France, HongKong and Jersey have been cited as the top jurisdictions with the hidden assets.