This archive report was first published on 30 August 2019.
Published on August 30, 2019, by Luis Franceschi.
The Kenya Revenue Authority's (KRA) recent crackdown on tax evasion has left many wondering about the delicate balance between enforcing tax laws and supporting local businesses.
At the center of the controversy is Keroche Breweries, a leading manufacturer of alcoholic beverages in Kenya. The company's directors, Joseph Karanja and Tabitha Karanja, were arrested and charged with tax evasion, including failure to pay Value Added Tax (VAT) worth Ksh.12.3 billion and Excise Duty amounting to Sh. 2.1 billion.
While tax evasion is a serious offense, many are questioning the KRA's strategy in dealing with the issue. Is the authority focused on results, or is it using a heavy-handed approach that may harm local businesses?
According to the Organisation for Economic Cooperation and Development (OECD), Africa loses $50 billion to tax evasion annually. The United Nations Economic Commission for Africa (UNECA) estimates that the figure is even higher, at approximately $100 billion.
Interestingly, the KRA has introduced an intelligence-based prosecution model to tackle tax evasion. This approach involves linking assets acquired through tax evasion schemes to trace and recover them.
However, critics argue that the KRA's approach may be too aggressive, and that the authority needs to find a balance between enforcing tax laws and supporting local businesses. As Italian economist Emmanuele Bobbio notes, tax evasion can have a negative impact on innovation and growth, and that a clever government may use additional revenues from improved tax enforcement systems to lower tax rates for certain strategic sectors and corporations.
