The Kenya Revenue Authority (KRA) has nearly tripled the number of tycoons brought into the tax net in the year ended June, reflecting the results of a clampdown on super-rich individuals who use nominee and offshore accounts to hide their wealth.
The taxman says it identified and roped in 461 high net-worth individuals (HNWIs), whose gross annual incomes is estimated at over Sh350 million, representing a 171.18 percent jump from 170 recruited a year earlier.
To shore up revenue, President William Ruto’s administration has intensified its crackdown on tax cheats, and it is expected to be more aggressive following the withdrawal of this year’s Finance Bill after the deadly protests that killed over 50 people.
The KRA has deployed hundreds of investigators to conduct background checks and lifestyle audits in fresh efforts to raise revenue and cut reliance on borrowing.
The threat of enforcement measures such as asset freezes, travel bans, deactivation of personal identification numbers (PINs), prosecution and exchanging data with other countries has been used to smoke out the super-rich individuals hiding a significant share of their earnings from the taxman.
“A review of the HNWI framework (was) finalised and over 461 HNWIs recruited,” the KRA wrote in its annual implementation plan for the current financial year ending June 2025, without divulging details.
The review of the HNWI framework is aimed at redefining “sub-segments of HNWIs to include wealth value”, the KRA says. Sources say the jump is the product of a pursuit of tax cheats and few individuals joining the higher income band.
The taxman had in a 2017 report listed HNWIs as taxpayers with gross annual income of between Sh350 million and Sh1 billion, translating to minimum monthly gross earnings of nearly Sh30 million.
This is calculated based on consolidated earnings from employment, private partnerships, marketable securities and the businesses they control.
The number of millionaires roped into the tax bracket annually has surged from a modest 22 in the year ended June 2021 before climbing to 291 in the year that followed.
The KRA has in recent years placed wealthy self-employed professionals such as lawyers, medical doctors, real estate investors and other super-rich individuals like politicians on its radar.
This is in a bid to curb tax evasion and fraud at the top of the income spectrum in a race to bridge gaping tax inequity and grow collections.
The KRA has not disclosed the revenue it unlocked from the super-rich individuals for the year ended June 2024.
The agency collected nearly Sh1.9 billion from 170 HNWIs recruited in the year ended June 2023, surpassing a target of Sh1.54 billion by 22.88 percent.
The KRA’s enforcement unit has enhanced use of various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from the Kenya Civil Aviation Authority (KCCA), which reveals individuals who own assets such as aircraft.
Car registration details are also being used to smoke out individuals who are driving high-end vehicles but have little to show in terms of taxes remitted.
Kenya Power meter registrations are also helping the taxman to identify landlords, some of whom have been slapped with huge tax demands.
The agency, which has perennially fallen short of ambitious revenue goals set by the National Treasury, traditionally relied on random audits to catch cheats.
Such assessments, however, delivered little evidence of evasion amongst the super-rich individuals who usually use sophisticated accounting techniques which are difficult to trace, including offshore tax shelters.
The taxman cranked up the clampdown following reports that the super-rich, especially those with political connections, have hidden wealth in trusts and a labyrinth of companies to evade taxes.
The infamous ‘Panama Papers’ of 2016, for instance, revealed HNWIs, including politicians, use elaborate corporate structures such as nominee directors and offshore tax havens to hide beneficial owners.
That in part prompted Kenya to ratify the Multilateral Convention for Mutual Administrative Assistance in Tax Matters (MAC) in July 2020, providing a platform “to work with other jurisdictions through tax information exchange agreements to conduct joint audits of HNWIs”.
“If we have a company registered abroad or a multinational … and it has a nominee person and they have declared a bill, we’ll be able to get information on that company in terms of transactions and we’ll link it with declaration of taxes — whether it has been declared or not,” a top KRA official told the Business Daily in a past interview.
Kenya was estimated to have 16 centi-dollar millionaires (at least $100 million or about Sh13 billion) and 7,200-dollar millionaires ($1 million or Sh130 million) in 2023, according to findings of an annual survey by international wealth advisory firm Henley &Partners in collaboration with its global intelligence partner, New World Wealth.
“While this minority of super-rich Kenyans are accumulating wealth and income, the fruits of economic growth are failing to trickle down to the poorest,” Oxfam International, a charity, wrote in a past report. “The rich are capturing the lion’s share of benefits, while millions of people at the bottom are being left behind.”
