To put this loss of revenue into perspective, it is nearly double the amount the government has allocated for the health sector in this year's fiscal budget and a third of the Sh327 billion they borrowed from the China Exim Bank to build the Nairobi-Mombasa standard gauge railway.
This revelation comes at a time the Treasury says it is strained for finances and is relying on expensive debt to fund development. This fiscal year the federal government plans to loan Sh503.1 billion (nearly $5 billion) from external lenders, in addition to a local debt of Sh241 billion (over $2 billion), as it seeks to plug a budget deficit of Sh689 billion.
Oxfam links tax exemption with increasing poverty levels in Kenya, corroborating past reports on the role tax-dodging multinationals play in condemning millions into abject poverty.
“Tax revenues are critical for funding the policies and services that can fight inequality including infrastructure, health and education. The use of tax havens and loopholes or the securing of preferential tax treatment doesn’t just reduce abstract balance sheets. Everyone else is forced to pick up the bill and the human cost is borne by the most vulnerable in society,” reads the report.
Besides receiving these tax exemptions, multinationals are estimated to evade taxes for an amount of Sh639 billion annually (source), seriously stifling Kenya's economic growth. And if all this isn't bad enough, the Oxfam report also mentions that these multinationals are complicit in paying low wages that cannot sustain decent livelihoods among Kenyan workers.
According to the report, the wages of Kenyan flower workers could be doubled just by adding 5 pence to a £4 bunch of roses.
After the publication of new rules last year, the Kenya Revenue Authority (KRA) finally has the power to deal with the international tax evaders. These new regulations enforce the Tax Procedures Act 2015, which gives the KRA the power to go after taxpayers who have been using legal gaps. The can now interrogate transactions and reverse those they deem were structured with the sole intention of avoiding tax and, order payment of the tax plus a penalty.
A 2015 report by the Tax Justice Network - Africa said Kenya’s corporate sector leads Africa in tax avoidance, estimating that the KRA could collect an additional Sh106 billion annually with close monitoring of multinational operations.
Image is of the Times Tower in Nairobi, which houses the Kenya Revenue Authority.
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