Tax crimes such as tax evasion and corruption top the list of factors that substantially impair revenue collection efforts across the world. In the process, colossal amounts of money; in billions of dollars, are lost every year.
In an article published by The Borgen Project in 2019 titled ‘Tax evasion in Sub-Saharan Africa’, the Organisation for Economic Co-operation and Development (OECD) estimates that Africa loses $50 billion annually to tax evasion.
Given the depth of tax crimes as an impediment in economic growth, there is a dire need to tighten the noose on the vice. Closer home, the fight against tax evasion has taken a different approach whose end goal is to decimate the vice as effectively as possible.
Notably, combating tax evasion is one of the Kenya Revenue Authority’s (KRA) top priorities for enhanced revenue collection.
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In the new approach, KRA is leveraging on the immense potential of intelligence gathering and analysis, among other strategies. Information gathering and analysis at KRA is anchored on the intelligence management function which has been key in collection of information relating to tax evasion, cyber-crime and corruption. The function has enhanced capacity to penetrate and quash tax evasion cartels.
According to the outcomes registered lately, intelligence-driven fight against tax evasion has proved among the best strategies whose efficacy in bringing down the intricate tax evasion webs is unmatched.
In the 2019/2020 financial year, for instance, KRA successfully foiled tax evasion schemes which could have seen the government lose approximately Sh259 billion. Through intelligence gathering and analysis, KRA profiled 1,309 individuals for tax purposes in the financial year that ended in June 2020.
In the same period, 367 tax evasion cases worth Sh65.93 billion were filed. From the cases, 303 were prosecuted for tax fraud. This translated into a performance of 51 per cent. In the process, KRA recovered Sh62.8 billion in revenue.
The intelligence and profiling office has further given KRA an upper hand in tackling other vices such as illicit trade. Illicit trade equally accounts for a monumental share of government revenue that ends up in the insatiable pit of tax evasion.
Through intelligence management, KRA in collaboration with multi-agency teams has made 100 interceptions of assorted illicit products within the 2019/2020 financial year. The intercepted products were valued at Sh1.2 billion and largely comprised of electronics, alcoholic and food products.
The adverse effect of illicit trade is threefold. First, it denies the government a fair share of revenue as one of the primary motives behind illicit trade is tax evasion. Secondly, goods traded illicitly are potentially hazardous to unsuspecting consumers. Thirdly, illicit trade stages unfair competition to compliant business ventures. This explains why the vice has to be combated by hook or crook. The commendable progress made so far can only mean one thing: the days for tax evasion perpetrators are continually diminishing. Through such collaborations, the country is now better equipped to emancipate tax revenues trapped in tax evasion schemes.
In addition to the aforementioned tax evasion combating mechanisms, KRA has put in place a whistleblower framework which empowers citizens to anonymously report tax evasion and other cases of tax crime. Any information presented to KRA under this framework is treated with the utmost confidentiality.
Where the information on tax evasion brought forward assists in tax recovery, the whistleblower gets five per cent of the total taxes recovered or two million shillings, whichever is lower.
Existence of the whistleblower framework means that we all have a responsibility to cut the tentacles of tax evasion. KRA urges members of the public to report such cases by sending an email to iWhistle.kra.go.ke.
- The writer is the Commissioner for Intelligence and Strategic Operations at KRA.