15/06/22

AFRICA: Kenya netted Ksh 985M in illicit financial flows last year, according to report.

As published on kbc.co.ke, Wednesday 15 June, 2022.

The Kenya Revenue Authority (KRA) realized Ksh 985.2 million ($8.5M) in revenue as a result of Exchange of Information on tax cheats with other countries, according to a report by the Global Forum on Transparency and Exchange of Information for Tax Purposes.

The Tax Transparency in Africa 2022 report by the Global Forum indicate that the exchange on information (EOI) unit within KRA established in 2014 under the Large Taxpayers Office of the Domestic Taxes Department, sent out 173 request last year to members of the forum which aided the netting of additional revenue.

Kenya has also seen an increase in EOI requests, from just one in 2018 to 17 in 2019, and 73 in 2020.

According to the report, Kenya realized revenues amounting to Ksh 130 million in 2019, Ksh 10.5 million in 2020.

“The evolution of the EOI function in Kenya over the years is a demonstration of the critical role played by top management strong support and involvement to improve the organisation of the EOI unit, provide the resources needed and enhance the relevant confidentiality principles, with an aim of effectively increasing domestic revenue mobilisation through tackling cross-border tax evasion,” stated the report.

For effective curbing of tax avoidance and tax evasion which amount to illicit financial flows, Kenya has trained 283 staff on EOI.

Kenya accounted for the largest share of request sent by other African countries regarding taxes with 45% followed by Tunisia at 30%. The two countries accounted for 92% of 592 requests sent last year.

On the other hand, the requests received by African countries from their partner states rose to 628 in 2021, compared to 451 in 2020.

“African countries (Algeria, Burkina Faso, Kenya, Lesotho, Nigeria and Tunisia) were net senders in 2021. Four of these (Kenya, Lesotho, Nigeria and Tunisia) were already net senders in 2020. Although African countries continue to make good progress, the disparities noted in 2020 continued in 2021, for both outgoing and incoming requests.”

Nonetheless, as a result of the request for information, African countries have continued to realize additional revenue gains according to the Global Forum.

Global Forum says African countries identified more than $38.9 million in additional revenues due to Exchange of Information Requests (EOIR) in 2021.

In total, 9 African countries have identified over $244 million of additional revenue from EOIR alone since 2014.

“Since 2009, EOI has enabled African countries to identify over $1.3 billion of additional revenue (tax, interests and penalties) through offshore tax investigations including EOIR and voluntary disclosure programmes (VDPs) launched prior to the beginning of the implementation of the AEOI standard,” said Global Forum.

Over 370 000 requests for information have been received by Global Forum members since 2009, enabling the identification or collection of at least $11.5 trillion in additional tax.

Global Forum adds that, in 2020, information on 75 million financial accounts were exchanged under automatic exchange of financial account information covering around $9.4 trillion worth of assets.

In 2020, United Nations Conference on Trade and Development (UNCTAD) estimated that Africa loses and estimated $ 88.6 billion annually to illicit financial flows which comprise corruption, tax evasion and other criminal activities.