The Kenya Revenue Authority (KRA) has flagged 1,058 companies and individuals for suspected tax evasion amounting to Sh132 billion in the 11 months through May 2021, more than fourfold the decade-long annual average.
The taxpayers under the KRA’s radar for not paying due taxes have nearly doubled the average 529 tax evasion schemes identified annually by the agency’s intelligence unit between 2012 and June 2020.
The potential tax yield, on the other hand, is 441.54 percent more than the annual average of Sh24.38 billion in the eight-year period following the formation of KRA’s intelligence unit in 2012.
The offences range from companies under-declaring sales or inflating allowances to cut profit, which is subject to taxation to factories overstating purchases to claim more value-added tax refunds, Terra Saidimu, commissioner for Intelligence and Strategic Operations Unit at KRA told the Business Daily in an interview.
Other schemes include employers understating salaried workers and remitting some pay as allowances to cut on tax due to importers smuggling in goods.
The taxman, who has struggled to meet revenue goals set by the Treasury over the years, attributes the jump in increased suspected tax evasion schemes on improved sharing of information between its detectives and those attached to other enforcement and intelligence agencies.
The multi-agency task force, which has a framework for sharing information, includes the National Intelligence Service (NIS), Directorate of Criminal Investigations, Financial Reporting Centre, Ethics and Anti-Corruption Commission, and Office of the Director of Public Prosecutions.
“Those are partners that give us information whenever they are investigating a case where financials are involved,” said Dr Saidimu.
“Some people have made it their business model where tax evasion is part of their profitability. Those are the people we call hardcore tax evaders.
“Once we have established there is deliberate tax evasion, we pass it on to our investigators who investigate and, in some cases, recover taxes or prosecute. But the prosecution does not negate paying taxes.”
Some 682 individuals and firms were identified between July 2020 and May 2021 for possible tax evasion due to errors that denied the taxman Sh63 billion. This is nearly five times the Sh10.63 billion average flagged since 2012 through June 2020 in 3,151 cases. The remainder 376 cases with estimated tax evasion of Sh69 billion involve “hardcore” tax evaders who “deliberately” dodged tax obligations.