SEALING GAPS

Kenya tops Africa's external tax recovery - report

The country recovered close to Sh1 billion last year in revenue lost through illicit financial flows

In Summary
  • Africa is losing close to over $80 billion in IFFs every year
  • Generally, African states identified more than $38.9 million in additional revenues due to EOI
KRA Commissioner General James Mburu
KRA Commissioner General James Mburu
Image: Courtesy

Kenya recovered close to Sh1 billion in revenue following an Exchange on Information deal on tax cheats with other African countries last year.

The Tax Transparency in Africa 2022 report shows Kenya Revenue Authority (KRA) netted the amount through the Exchange on Information (EOI) unit established in 2014. 

''KRA sent 173 requests last year to members of the forum which aided the netting of additional revenue,'' the report reads in part. 

Kenya has also seen an increase in EOI requests, from just one in 2018 to 17 in 2019, and 73 in 2020.

According to the report, Kenya realised revenues amounting to Sh130 million in 2019 and Sh10.5 million in 2020.

Kenya accounted for the largest share of requests sent by other African countries regarding taxes with 45 per cent followed by Tunisia at 30 per cent.

Requests received by African countries from their partner states rose to 628 in 2021, compared to 451 in 2020.

Algeria, Burkina Faso, Kenya, Lesotho, Nigeria and Tunisia were net senders in 2021.

African states identified more than $38.9 million in additional revenues due to EOI, with nine countries netting over $244 million since 2014. 

“Since 2009, EOI has enabled African countries to identify over $1.3 billion of additional revenue through offshore tax investigations,'' Global Forum on Transparency and Exchange of Information for Tax Purposes said. 

Over 370 000 requests for information have been received by forum  members since 2009, enabling the identification or collection of at least $11.5 trillion in additional tax.

The report further shows that 75 million financial accounts were exchanged under the automatic exchange programme in 2020, covering around $9.4 trillion worth of assets.

It adds that curbing Illicit Financial Flows (IFFs) in Africa will see the continent bridge a large share of this financing gap estimated at $200 billion every year.

The report notes that Africa is losing in excess of $80 billion every year in illicit flows, pushing countries to borrow expensively to fund budgets. 

"There is a strong link between tax transparency, the fight against IFFs, and development. This link is even stronger in the context of the African continent, hence the need for a specific agenda on these issues,'' states the report.

A 2019 report from the AU Commission estimated the amount between $50-80 billion annually, while in 2020 the UNCTAD identified losses at $88.6 billion.

According to the report, the high amount of losses due to tax evasion and other IFFs has a direct impact on the development agenda in the region.

Pre-Covid-19 estimations set Africa’s Sustainable Development Goal (SDG)’s financing gap at around $200 billion per year. This gap is certainly bigger today as a consequence of the pandemic.

As of early 2021, the SDG gap in developing countries was estimated to have increased between 50 per cent or $3.7 trillion) and 70 per cent (totaling $4.2 trillion) in 2020. 

"The Africa Initiative on transparency and EOI for tax purposes is a step in the right direction in reducing tax evasion or avoidance as well as all other forms of illicit financial flows from Africa,''– Albert Muchanga, AU Commissioner for Economic Development said.