Officials of dubious probity factor in tax evasion
If I say so myself, I laughed my head off on reading a report titled ‘KRA reveals 6 tricks foreign firms use to evade tax.’ [Just Google for that on ‘ by Timothy Maina, November 18, 2018].
‘KRA’ is, of course, the anagram for the Kenya Revenue Authority – the equivalent of Tanzania’s TRA, the premier tax revenue administrators and collectors for the two East African Community countries…
After reading the 213-word long (short, perhaps?) report, I could not for the life of me decipher what was there to be revealed regarding tax evasion – be that in Kenya or Kiribati; evasion by foreigners or locals…
Let’s put that in perspective…
According to Reporter Timothy Maina, it was the Kenya Revenue Authority which ‘revealed (sic) the “six tricks that multi-national firms use to dodge paying tax. One of the schemes (‘tricks’) involves the firms exporting very cheaply and importing very expensively…” The Second Trick is that “most firms underdeclare what they pay to their expatriate workers – a move that reduces the firms’ profits and, therefore, corporate tax…”
The Third Trick is that the firms “overprice the goods they import by invoicing for an import through a different country. For instance, a car purchased from Japan would be invoiced in Mauritius, a tax haven – leaving KRA with no tax to collect.”
Really…? Well, I don’t know for sure.
But, let’s move on regarding tax evasion Trick Number-4: “Firms in the agricultural sector underprice their exports to declare meager profits.”
Trick Number-5: “Parent-firms use their branches in Kenya to artificially strip their functions to appear as if they are doing less than they actually do – which results in less charges (tax collections) by KRA.” Tax Evasion Trick Number-6 is that “the (foreign trading) companies exploit the privileges given to them by the government when asked to provide information – including the use of their countries’ language in official documents sought by KRA.” [I don’t quite cotton onto this…]
According to the ‘ posting, KRA told the Nairobi-based Sunday Nation that it “had recovered Ksh9.3bn (roughly US$90.5m) from auditing close to 150 firms in the last four years” – and is “in the process of recovering KSh6.1bn (US$59.33m) more!”
Oh, really!
Ah well… A response by one ‘Stephen Machini’ to the second tax evasion trick was caustic enough:
“How do underpaying expatriates reduce declared profits? You could have said it reduces page deductions; but that means a reduction in net profits, since wages are allowable expenses in computing company profits – and, l believe, both are at 30 per cent! ‘Msitubebe ufala with poorly-researched crap!” [Sheesh!].
Defined as ‘the illegal non-payment or underpayment of tax,’ tax evasion is as old as the yonder hills… perhaps older!
So, there’s nothing which is really that new in KRA’s ‘revelation’ of “six tricks” used to evade tax – be they used by foreign or local firms!
In My Book of Things, what’s really at issue isn’t the ‘tricks’ allegedly used by prospective taxpayers to evade their statutory fiscal obligations to the country. Crucial is the fact that, in alarmingly many cases, brazen tax evaders are aided and abetted in their heinous perpetrations by senior tax and other public officials of highly dubious probity, period... Tears!
