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Trouble for super-rich as Uhuru warns tax evaders

Bernard Gitau @benagitau

President Uhuru Kenyatta has directed Kenya Revenue Authority (KRA) to audit high net worth individuals whose lifestyles are not reflective of the taxes they pay, if at all.

“Such individuals should be compelled to demonstrate their source of wealth and contribute their share of taxes accordingly,” he said.

The Head of State said over the past few years, the country has experienced impressive growth of gross domestic product (GDP) which has outstripped the growth of the tax base, a situation which has seen few people carry the burden of many by paying more taxes.

According to Knight Frank Wealth Report 2018, Kenya’s population of High Net Worth Individuals (HNWIs) with a value of at least Sh500 million ($5 million) in net assets increased by 180 individuals. The number rose to 1,290 in 2017, a 16.2 per cent  increase from 1,110 in 2016.

According to data provided by Wealth-X, out of the 1,290 individuals, 90 are worth Sh5 billion ($50 million) or more. However, Kenya has less than 10 individuals worth Sh50 billion ($500 million) or more.

The report indicated that the number of Kenya’s dollar millionaires worth at least Sh500 million is expected to grow by 60.5 per cent over the next five years to 2,070 in 2022.

This has been termed the second fastest growth in Africa behind Nigeria’s 74 per cent hence Keny Revenue Authority is expected to collect a substantial amount of taxes from them.

Ben Woodhams, Knight Frank Kenya managing director, said this expectation of increased wealth underlines the confidence that Kenyan HNWIs have in the future economic performance of the country.

The report revealed that the top sectors generating wealth for Kenyans are retail businesses (18%), finance, banking and investment (18%), industrial businesses (8%) and manufacturing (6%).

The majority of Kenya’s affluent are self-made (56%), five per cent have inherited, while 39 per cent have made wealth both from inheritance and their own enterprises. 

Speaking during the 2018 National Taxpayers Day, President Uhuru directed that the law must reflect the seriousness of tax collection and the consequences of default.

“There should be no room for tax evaders to thrive in Kenya, criminal cartels like those smuggling imported taxable goods through our ports of entry ought to be easily detected and contained in the shortest time possible,” he said.

Uhuru also said the use of technology is an enabler and an immediate necessity and KRA must incorporate cutting edge technology in every aspect of its operations.

The President urged KRA to leverage the benefits of the soon-to-be rolled-out, National Integrated Identity Management System as another tool in their arsenal.

“The use of digital maps to identify parcels of land and the nature of developments thereon could potentially bring in millions of additional taxpayers in to the fold,” he said. Tax evaders are said to cost the country over Sh90 billion annually.

He said traders operating fake electronic tax registers and pocketing the VAT that they collect should be brought to book. The President also drew attention to the role of integrity in tax collection.

He said the role of the tax collector remains a solemn and powerful responsibility, one that can easily be abused.

“I expect the investigative agencies responsible to act swiftly and without remorse on those found to have abused their privileged status as tax collecting men and women, let them face the law and be accountable for their misdeeds,” Uhuru said.

Lifestyle audit

He also assured that there is already an ongoing lifestyle audit of KRA officers in sensitive positions. “We continue to place a heavy duty on tax payers to comply with the law, however, there is an equal expectation that those charged with the duty of tax collection do not use their positions of influence to engage in extortion or acts of complicity with tax evaders,” he said.

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