KRA sets up special unit to track down rich tax cheats

• Only 100 people have registered as earning annual incomes of more than Sh44 million – the threshold for classification as a high net-worth individual – despite the massive growth in conspicuous consumption in areas such as Nairobi.
• The Kenya National Bureau of Statistics (KNBS) has also published data showing that 40,000 people in Nairobi alone live in high high-end housing estates where the average home prices range between Sh35 million - Sh65 million-- way above the declared incomes.
• KRA is responding to this market anomaly with the establishment of a special unit that will pursue all High Net-Worth Individuals (HNWIs) for rigorous tax assessment to  reconcile their incomes against the huge expenses.

Rich Kenyans, who have been flaunting their wealth with multi-million-shilling purchases of big cars, helicopters and palatial homes, have caught the attention of the taxman and will henceforth have to make full disclosure of their incomes to a special team of tax collectors. 

The Kenya Revenue Authority (KRA) says a sharp increase in imports of the luxury items and multi-million-shilling investments in real estate has opened its eyes to the massive tax leakage, which if tapped could yield billions of shillings in additional revenues to the Exchequer.

The taxman’s argument is supported by the fact that only a few Kenyans have officially registered as belonging to the high-income earners’ bracket.

Only 100 people have registered as earning annual incomes of more than Sh44 million – the threshold for classification as a high net-worth individual – despite the massive growth in conspicuous consumption in areas such as Nairobi.

The average annual declared income for the top 100 registered taxpayers stood at Sh77 million, according to KRA’s income tax department while that of the top 1,000 individual taxpayers stands at Sh14 million, raising questions on the source of money that is being used to purchase the luxury items.

The taxman’s argument is also supported by the fact that the prices of luxury items such as helicopters stand way beyond the incomes officially declared by the top 1,000 individual taxpayers.

The Kenya National Bureau of Statistics (KNBS) has also published data showing that 40,000 people in Nairobi alone live in high high-end housing estates where the average home prices range between Sh35 million - Sh65 million-- way above the declared incomes.

KRA is responding to this market anomaly with the establishment of a special unit that will pursue all High Net-Worth Individuals (HNWIs) for rigorous tax assessment to  reconcile their incomes against the huge expenses.

“The formation and operationalisation of this unit will be immediate,” KRA’s head of communications told the Business Daily.

Industry statistics show that the purchase of luxury cars has risen steadily in the past five years, indicating growth in the number of people buying them.

Luxury car sales remained stable in 2011 despite the harsh economic times, according to the Kenya Motor Industry (KMI) data.

Some 198 luxury vehicles including BMW, Mercedes Benz, Range Rover, Hummer, Jeep and Chrysler were bought in 2011, compared to 204 the previous year.

The number of aircraft purchases has also risen, driven by orders from wealthy individuals and companies.

The Kenya Civil Aviation Authority (KCCA) data shows that Kenya had 1,056 registered aircraft at the end of June 2011 compared to 1,031 at the end of 2010 – an increase of 26 aircraft in 12 months.

A massive 84 per cent of the registered vessels are light aircraft weighing up to 10,000kgs that are popular with individual owners or firms operating light charter flights.