Wealthy Kenyans hiding Sh15trn in foreign banks
1 weeks ago, 07:28
Kenya’s super-rich are holding more than Sh14.8 trillion in offshore tax havens across the world, a newly published report says.
The individuals, who form the cream of Kenya’s wealthiest, mostly use the offshore accounts to hide ill-gotten trillions, evade taxes and steer clear of Kenyan laws, the report by American think tank National Bureau of Economic Research (NBER) says.
“Among the countries that created a lot of shell companies (relative to the size of their economy), one finds Jordan, Russia, Taiwan, the UAE, Venezuela, Zimbabwe and Kenya,” the report says, adding the list is made of countries with high offshore wealth to GDP ratios.
At Sh14.8 trillion, the estimated amount of black money held by Kenyans abroad is nearly five times Kenya’s 2018-19 Sh3 trillion budget.
The NBER report indicates that Kenyans holding undisclosed funds in foreign banks have not made use of a State tax amnesty to declare the money and repatriate it to remain eligible.
Treasury secretary Henry Rotich in the 2017/18 Budget statement gave Kenyans with wealth abroad one more year to repatriate it, keeping the amnesty window open beyond the June 2018 deadline.
Tax havens are popular with individuals or entities because of their flexible tax laws. The findings were made public yesterday as experts called on the Treasury to introduce more incentives for wealthy Kenyans to return their wealth.
“The percentage of GDP held offshore is clearly an eye catcher. First, it speaks to a common sub-Saharan Africa narrative and here it seems Kenya is evidently an outlier,” said Nairobi-based investment analyst Aly Khan Satchu.
Mr Satchu said the wealth that has been stashed away is likely to be “old money” mostly belonging to political figureheads in Kenya’s successive regimes that will only return with better incentives.
“Politically exposed wealth probably saw the offshore markets as a safe haven strategy. This is now being reversed and as a senior banker at an international bank told me, a lot of this money is trapped because it will not be able to exit under the new more stringent Know- Your- Customer rules,” he said.
Kunal Ajmera, the chief operating officer at Grant Thornton, said Kenya has a “very high rate of taxation” and “very little in terms of incentives to influence anyone wishing to invest locally.
“It would not be fair to say that all the money stashed abroad is looted wealth because a lot of this wealth would be part of a tax evasion strategy as well,” he said, adding that while the amnesty for those with wealth abroad has not achieved expected results there is also a general trust deficit on Kenya Revenue Authoroty’s intentions as people believe that there might be punitive action once the wealth has been declared and brought back.
“The amnesty scheme is a well-meaning tool to bring back much needed liquidity in the economy. We have to trust our own revenue authority and give them this benefit of doubt,” he said.
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