[Kenya Business Week] The economic cost of trade misinvoicing
Even as Kenya continues to seal loopholes of money laundering and illicit flows, details are emerging that the country is experiencing sophisticated forms of tax evasion as companies, both local and multinationals, stash their proceeds in tax havens denying the government the much needed revenue for the country’s development.
Analysis of trade misinvoicing in Kenya in 2013 for example shows that the potential loss of revenue to the government was $907 million for the year, according to a new study by Global Financial Integrity. To put this figure in context, this amount represents eight percent of total annual government revenue.
President Uhuru Kenyatta has previously worked with Switzerland, regarded as one of the tax havens. This year with his Swiss counterpart Alain Berset they oversaw the signing of a key agreement that clears the way for the recovery of assets acquired through corruption and crime in Kenya and stashed in foreign countries. This, as the country seeks bolder ways of tackling a vice that is crippling Africa which has lost more than $1 trillion dollars of its wealth to illegal financial activities that extends beyond its borders in the last 50 years. This, even as more voices continue to call on Africa to prioritize war on tax evasion and money laundering and advocating for the active participation of private sector in taming Africa’s illicit financial flows.
This week, the Kenya Association of Manufacturers (KAM) has recommended the formation of an industry-led multi stakeholder Taskforce that will advise on people-driven public expenditure, debt and taxation policies, and long term industrial measures to drive competitiveness for the manufacturing sector. This following the Finance Act, 2018 that introduced new tax measures aimed at increasing its revenue collection. The government has in the recent past introduced a raft of measures aimed at boosting revenue collection including overhauling the country’s current income tax legislation framework and announcing measures designed to help grow the economy, according to the Budget Statement for the fiscal year 2018/2019. To cater for burgeoning needs, the country has invested in innovative ways of tax collection which at times have paid off.
The World Bank's18th Kenya Economic Update has posited that Kenya’s real gross domestic product (GDP) growth is projected to rise to 5.7% in 2018—up from 4.9% in 2017—and continue to increase steadily to 5.8% in 2019, and 6.0% in 2020. This follows an earlier projection the institution had released in April this year that indicated Kenya economic growth would rebound by 5.5 per cent up from 4.8 per cent in 2017. Last year, economic activity in Kenya declined to its weakest level in five years occassioned by drought, slowdown in credit growth to the private sector and a rise in global oil prices.
But even with the projected growth, Stanbic Purchasing Managers’ Index signaled a slower improvement in business conditions in the private sector in September, with the latest expansion being the weakest in the current ten-month phase of growth. This, despite an earlier robust growth in the month of June and August.
In agriculture, the world’s largest farmer-to-farmer digital network announced it had reached over 1.1 million users across Kenya and Uganda with farmers having asked and answered more than one million questions through Wefarm in a single calendar month. The company has been working at placing the voices of rural farmers back into the heart of global agriculture.
The Africa Development Bank in its latest analysis says that Kenya has taken less than a decade to make giant strides in its energy sector. Key to this are two iconic renewable energy projects, Turkana Wind Farm and Menengai Geothermal Power Station.
A clean energy revolution has been taking shape in Kenya driven by citizens and institutions as appetite for renewable energy rises to new highs. Organizations that have been at the forefront of championing this renewable energy drive include Crossboundary Group, Greenpact, Orb Energy and JinkoSolar among others.