Taxman seeks bank, financial deals of secret shareholders

The Kenya Revenue Authority (KRA) has set sights on accessing financial transactions of secret shareholders who invest in domestic firms through nominee accounts and directors for tax compliance.

The taxman says the requirement for firms to reveal all shareholders by end of the month and proposed implementation of a global convention on automatic sharing of tax information with other countries will help mitigate tax evasion amongst secret shareholders in local firms.

KRA commissioner for Intelligence and Strategic Operations Terra Saidimu said the taxman will target nominee accounts held by local and international investors in a bid to expand tax base this fiscal year where it has a revenue target of Sh1.61 trillion.

Treasury secretary Ukur Yatani has proposed amendment to the Tax Procedures Act to facilitate implementation of the Multilateral Convention for Mutual Administrative Assistance in Tax Matters (MAC) which Kenya ratified in July 2020.

The convention, under the Organisation for Economic Co-operation and Development’s (OECD’s) Global Forum on Transparency and Exchange of Information on Tax Matters, will enable KRA exchange data with other jurisdictions.

“The organisation or the jurisdictions (under OECD) identified that most of the (tax evasion) transactions are done under the nominee accounts and nominee directorship. All the members of the OECD signatory to the convention were required to sign the beneficial ownership requirement,” Dr Saidimu said.

“Through that, we are able to know the beneficial owners behind a company and a transaction, and it will also facilitate the exchange of information either through request or automatic exchange of information.”

The disclosure of beneficial owners is increasingly becoming a global practice.

This followed the infamous ‘Panama Papers’ in 2016 which revealed high net-worth individuals (HNWI), including politicians, use elaborate corporate structures — including nominee directors — and offshore tax havens to hide beneficial owners.

“We do not request blanket information about certain transaction, but specific information against a certain individual linked to a KRA PIN (personal identification number),”Dr Saidimu said.

“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.”