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Global Finance Trust: Kenya loses big in import, export revenues

By Valentine Kondo | October 14th 2018
Kenya’s import and export returns of $907 million (Sh91.5 billion) could not be accounted for due to mispricing imports and exports in 2013. [Photo: Courtesy]

Kenya’s import and export returns of $907 million (Sh91.5 billion) could not be accounted for due to deceitful set of prices on imports and exports in 2013.

The report titled ‘’Potential Revenue Losses Associated with Trade Misinvoicing’’ released on Tuesday shows that importers and exporters devalued goods as well as engendering higher prices on imports and exports to evade taxes and get huge tax reimbursements from the government besides getting money back into their accounts in a foreign country.

According to Global Finance Trust, Sh77.3 billion were lost due to import inaccuracies. This figure represents Sh32.6 billion of uncollected tax (VAT), Sh23.1 billion in custom duties and Sh21.5 billion in corporate income tax.

GFI President Raymond Baker held, “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.”

GFI report read, “This amount represents eight per cent of total annual government revenue as reported to the International Monetary Fund.’’

The government offers cuts in tax on prices of imports (locally made products) to induce higher prices in order to generate extra refunds.

Kenya is the biggest exporter in tea and coffee well as spices in whose Sh14.1 billion got misplaced due to improper set of prices.

Report further shows that the misinvoicing resulted in revenue loss of Sh9.2 billion in which cereals represented Sh2.1 billion, vehicles (Sh1.8 billion), electrical machinery (Sh1.7 billion), clothing (Sh2.1 billion) and mineral fuels accounted for Sh1.5 billion.

Imports and exports worth Sh1.2 trillion and Sh393 billion were analyzed to come up with the findings.

The GFI report indicates there exists a huge gap between the country and its mutual trade partners Pakistan(Cereals), China (Vehicles and electrical machineries) and India (Mineral Fuels).

The country’s revenue from exports saw fluctuations in value of tobacco, tea and coffee in a constant figure of between Sh50-Sh60 billion amid 2011- 2017.

In 2015, the exports value went up to Sh59 billion on foods and beverages representing 43.7 percent of total exports while that of non-food exports such as machineries and vehicles hit the high of Sh14 billion.

Close to Sh457.5 billion would have been lost in a span of five years if the causes remained constant up to 2017.


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