Concern as wealthy Kenyans stash their riches in tax havens


Majority of Kenya’s ultra-rich register non-trading firms to stash their riches in foreign private banks in tax havens, analysis of past global surveys suggest, fortunes which have grown into trillions of shillings over the years.

At the same time, shrewd multinationals underdeclare their assets in the country, shipping out tens of billions of shillings in possible tax revenue to the government.

The latest reliable data available from international banks showed that an estimated 70 percent of Kenya’s national wealth — gross domestic product (GDP) — was stashed abroad as of 2007.

The data, which was availed in 2016, was analysed and released by economists at the American research firm National Bureau of Economic Research (NBER) last September.

With an equivalent of 70 per cent of GDP hidden in private firms abroad as of 2007, Kenya’s super-rich only rivalled United Arabs Emirates (UAE) in the world.

Kenya’s GDP stood at Sh1.83 trillion in 2007, official data by the Kenya National Bureau of Statistics show, indicating the wealthy had a stash of Sh1.28 trillion in offshore accounts 11 years ago.


With international prudential rules such as those in the 28-nation European Union requiring international banks to disclose their foreign deposits, fat cats have been in a rush to register non-trading firms to conceal their identity.

“Among the countries that created a lot of shell companies (relative to the size of their economy), one finds Jordan, Russia, Taiwan, the UAE, Venezuela, Zimbabwe and Kenya,” NBER economists said in the report that only covered personal riches and not corporate assets.

That may not come as a surprise because of the extradition case facing former Kenya Power and Lighting Company managing director Samuel Gichuru and ex-Energy minister Chris Okemo.

A Jersey Island court issued a warrant of arrest for the two to face criminal charges related to money laundering, fraud and misconduct on April 20, 2011 and subsequently a confiscation order to seize the £3.28 million and $540,330.69 (Sh486.5 million under prevailing rates) held in the offshore account of Windward Trading Limited.

However, it is not individuals alone who are wiring abroad cash from Kenya.


A separate report by Washington-based research and advocacy firm Global Financial Integrity (GFI) suggested on October 8 that Kenya could be losing about 10 percent of taxes to multinationals, which undervalue their transactions, thus cutting their tax bills.

The report based on analysis of Kenya’s bilateral trade data in 2013 as published by the United Nations suggests the taxman lost $907 million to trade misinvoicing in that year.

“The estimated value gap of all imports and exports represents approximately 23 percent of the country’s total trade,” GFI says in the report titled ‘Kenya: Potential Revenue Losses Associated with Trade Misinvoicing’.

The firm’s analysis suggest imports misinvoicing cost the country $767 million, comprising $324 million in uncollected VAT tax, $229 million in customs duties and $214 million in corporate income tax.

Import under-invoicing was more pronounced in mineral fuels ($15 million), electrical machinery ($17 million), vehicles ($18 million), cereals ($21 million) and worn clothing ($21 million), the report says.


Misinvoiced exports related to lower than expected corporate income and royalties was estimated at $140 million during that year, GFI says.

“The practice of trade misinvoicing has become normalised in many categories of international trade,” GFI President Raymond Baker said in the report on the firm’s website.

“It is a major contributor to poverty, inequality, and insecurity in emerging market and developing economies. The social cost attendant to trade misinvoicing undermines sustainable growth in living standards and exacerbates inequities and social divisions, issues which are critical in Kenya today.”

While corporates may be underdeclaring their assets to avoid paying taxes, global trends suggests the tax rate is largely not a motivation for wiring of personal wealth in tax havens such as Switzerland and Jersey.

For example, UAE and Saudi Arabia, which had a large share of GDP stashed in offshore accounts by individuals, do not levy tax on personal wealth.


Kenya has ramped up efforts to have wealth stashed abroad repatriated by a tax pardon to those who will have filed returns for the period up to 2017 by June next year.

The country has also signed deals with Switzerland, United Kingdom and Jersey for the return of assets from corruption and crime in Kenya.

The tax forgiveness will apply to those who declare income from their wealth abroad, including homes, for the period ended December 2017, by filing returns with the Kenya Revenue Authority and wiring the cash to bank accounts back home.

The amnesty for accrued tax, interest and penalties, however, exclude fat cats who accumulated riches abroad from crimes of terrorism, poaching and drug trafficking.

Those who will fail to comply by the proposed June 2019 deadline will face a 20 percent penalty on the tax payable for any undeclared funds on top of the tax payable.

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