Editorials

Slay tax evasion dragon before it ruins economy

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Times Tower. FILE PHOTO | NMG

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Summary

  • The KRA's aggressive tax collection programme in some ways has not solved the problem.
  • In particular, attempts to widen the tax net have only fuelled public anger, especially the poor and struggling businesses, as the wealthy go scot-free.
  • They hide their sources of income while engaging in luxury spending as the poor are taxed further to painful inequality.

That civil servants' salaries will delay due to lack of money and that Kenya Revenue Authority (KRA)'s tax collections dropped by Sh100.72 billion in five months show that the government has failed again to have its finances in order.

Yes, Covid-19 has affected the economy, and the tax cuts to cushion Kenyans from the effects of the pandemic have led to a drop in KRA collections, but if wealthy tax evaders were contributing their share, if the government was using the money well, it would not be struggling to pay salaries or sink the country further into debt by borrowing Sh256 billion from the IMF.

For years, economists have pointed to rampant tax evasion and embezzlement as the country's most serious problems. Tax evaders' contributions can easily plug the KRA deficit especially when there is a fall in corporate earnings, rising layoffs, and cuts on levies.

The KRA's aggressive tax collection programme in some ways has not solved the problem.

In particular, attempts to widen the tax net have only fuelled public anger, especially the poor and struggling businesses, as the wealthy go scot-free.

They hide their sources of income while engaging in luxury spending as the poor are taxed further to painful inequality.

For years now, KRA officials have predicted that tax collection will improve as it pursues cheats. In August, its detectives said they had identified 1,309 firms and wealthy individuals that owe it Sh259 billion. It threatened to ban them from travelling abroad, freeze their assets, and deactivate their Personal Identification Numbers (PINs).

But despite such headline-grabbing efforts and many databases to pursue tax evaders (bank statements, import records, motor vehicle registration, Kenya Power records, water bills, civil aviation data revealing helicopter ownership, among others), questions arise whether the authorities are making measurable progress.

There have not been many high-profile arrests. Even if this happens, the wealthy spend a day or less in jail and they are released.

If Kenya is ever going to get its public finances in order, it will have to be more aggressive in pursuing evaders and stop misusing taxpayers' money.