A 2018 report reveals that multinational corporations (MNCs) are depriving Kenya of billions in tax revenue through aggressive tax avoidance strategies, including underreporting income for expatriate employees and leveraging opaque financial structures to obscure profits.
Authored by the Partnership for African Social & Governance Research, the study details how MNCs evade taxes by concealing subsidiary profits and exploiting mechanisms like trade misinvoicing. Between 2002 and 2011, documented data indicates Ksh146 billion was lost through such practices, while the Tax Justice Network Africa estimated annual losses at Ksh639 billion in 2015.
The report criticizes Kenya’s Nairobi International Financial Centre (NIFC), established in 2017, for enabling secrecy through corporate structures that mask ownership and grant tax exemptions. It warns that such frameworks conflict with donor priorities for transparency and revenue generation.
Real estate, construction firms, and Naivasha-based flower farms—many subsidiaries of Dutch entities—are singled out as prime examples. The report cites Flora Holland, the Netherlands’ largest flower marketer, which disclosed that Kenyan subsidiaries contribute $250 million annually to its market while reporting losses in Kenya, suggesting deliberate tax evasion.
"Transfer pricing is not a perception but a reality," stated Caxton Kinuthia, a KPMG East Africa tax director in 2015. The Kenya Revenue Authority (KRA) is now prioritizing cross-border data sharing to counter growing tax fraud as the country expands its financial hub ambitions.
"While MNCs acknowledge corporate responsibility frameworks, their adoption of sustainability reporting remains inadequate," the report notes, citing Transparency International. This gap exacerbates challenges in tracking illicit financial flows.
