The Kenya Revenue Authority (KRA) is eyeing more than Sh5 billion in extra revenue from a handful of billionaire tax evaders over the next three years, setting the stage for travel bans, asset freeze and deactivation of Personal Identification Numbers (PINs).
The taxman has identified High Net-Worth Individuals (HNWI) with gross annual incomes of between Sh350 million and Sh1 billion among persons hiding a huge share of their earnings from the State.
In its corporate plan for the three years to June 2024, the KRA says it will aggressively seek to curb tax evasion at the top of the income spectrum in the search for equity and additional national revenues.
The tax cheats risk travel bans, collection of duty directly from their suppliers and bankers, and prosecution in what promises to be the biggest crackdown yet on high net-worth persons.
This signals that rich self-employed professionals like doctors, real estate investors, and lawyers as well as wealthy individuals will be in the crosshairs of the taxman.
The taxman projects to rake in nearly Sh1.28 billion additional revenue from 20 tycoons it targeted in the current year ending on Wednesday.
It will raise Sh1.4 billion more in the year starting Thursday, Sh1.54 billion in 2022 and Sh1.7 billion in 2023, targeting between 15 and 20 billionaires annually.
The KRA is racing to bring more people into the tax brackets and curb tax cheating and evasion in the quest to meet targets in an economy where Covid-19 economic fallout has ruined collections.
Hardships resulting from the pandemic have also forced the State to make minimal duty increases to defuse public outrage over rising consumer goods, especially fuel.
"We shall seal revenue leakages through a multi-faceted programme… as we deploy our robust intelligence network to penetrate corruption and tax evasion cartels to bring to bear the consequences of evading taxes and engaging in corrupt practices," said KRA commissioner-general Githii Mburu.
To catch tax cheats and measure evasion, the KRA has traditionally been carrying out random audits.
But such reviews deliver little evidence of evasion among the extremely wealthy, in part because the rich use sophisticated accounting techniques that are difficult to trace, such as offshore tax shelters.
Kenya is known to have a large group of super-rich individuals (especially the politically connected), who have hidden their wealth in trusts and a labyrinth of companies to evade taxes.
The taxman has stepped up its fight against tax evasion and sought additional funding to hire 1,000 intelligence and enforcement officers in an effort to beef up the investigations of wealthy individuals and firms.
The KRA enforcement unit has recently been using various databases to pursue suspected tax cheats, among them bank statements, import records, motor vehicle registration details, Kenya Power #ticker:KPLC records, water bills and data from the Kenya Civil Aviation Authority (KCCA), which reveal individuals who own assets such as helicopters.
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 helping the taxman to identify landlords, some of whom have been slapped with huge tax demands.
The KRA has also hired auctioneers to help it track the properties of the individuals and companies who have failed to pay the taxes due.
The clampdown on the rich is also revealed in a commitment that Kenya made to the International Monetary Fund (IMF) to recover unpaid taxes from high-net worth professionals and traders in efforts to raise the national revenues.
"By June 2021, we will develop and implement risk-based compliance strategies for two to three non-compliant sectors, including professionals, high net worth individuals, and real estate sector," the IMF said Friday on Kenya’s efforts to grow tax collections.
The KRA earlier data of top taxpayers shows that besides entrepreneurship, some professions reward individuals well enough to propel them to the top of the income ladder.
Doctors, lawyers and accountants, especially partners in the Big Four audit firms, are among those whose professional incomes offer a real chance of social mobility. Partners at audit firms can rake in tens of millions of shillings in a year depending on the performance of their companies.
This is because they are entitled to a share of profits or losses made. More consultancy jobs often translate into higher earnings for these individuals.
Top lawyers can also make a killing from their work, especially when they advise or represent large corporate clients in high-stakes commercial transactions and disputes.
Doctors running their own clinics are also on the gravy train.