This archive report was first published on 19 September 2019.
Kenya's Tax System: A Study in Inequality ¶
Published on September 19, 2019, a report by the Jesuit missions in Kenya, Zambia, and Germany has shed light on the glaring inequality in Kenya's tax system. The study, which was jointly conducted with the Kenya Revenue Authority (KRA), reveals that the poor bear a disproportionate burden of taxation while wealthy individuals and corporations evade taxation.
The report, dubbed Tax Justice & Poverty, confirms the remarks made by KRA Commissioner General Githii Mburu that there is enough money in the local economy to avoid borrowing loans. The study highlights the massive inequality in the sharing of the country's tax burden, showing how the poor continue to sustain the economy while corporate and private wealth holders continue to under-declare their income and dodge taxation.
According to the report, there is a lack of transparency regarding the income of wealthy individuals, which arises from different sources such as labor, capital, rent, dividends of business ownership, etc. This lack of transparency has resulted in a relatively higher tax burden on small and medium businesses and small and medium income holders, even on poor people who cannot avoid paying VAT.
The report also paints a picture of a well-oiled scheme put in place to avert detection. It states that there is an overwhelming comparative tax knowledge of highly paid specialists, namely tax lawyers, tax consultants, and tax auditors engaged by and working for private and corporate wealth holders. This is compounded by chronic understaffing and lack of requisite equipment, which militates against efficient and effective collection of tax revenues.
The reality of growing tax evasion is reflected in the low number of taxpayers officially in the millionaire bracket compared to the extremely high number of known dollar millionaires in the country and the moderate pace at which the national economy has been growing.
To achieve a fair and just tax system, the report recommends that tax administration in the country needs to be strengthened and legal options available to tax officials improved. Even more importantly, it says Kenya would need assistance from developed countries, for example, by receiving data regarding non-taxed assets hidden by private and corporate wealth holders.
This would curb illicit financial flows leaving African states for developed countries; it would reduce corruption, since there would no longer be places to hide those assets. This, it notes, would at the same time assist African states to gain financial independence, many years after having obtained political independence.
