KRA can’t trace Sh800bn wired from offshore banks

Kenya Revenue Authority (KRA) has lost trace of Sh803 billion that wealthy Kenyans wired back into the country from offshore accounts in the last three years after they were offered an amnesty on tax and the source of the riches.

The taxman Tuesday said he was uncertain whether the repatriated money was used for the intended purpose of development or shipped back to offshore investments after receiving clearance from the State.

About 3,403 applicants took advantage of the three-year amnesty window to repatriate the billions tax-free in a period when they were not required to declare the source of their wealth or even account for previous years’ tax arrears.

“We didn’t come up with a policy to say if you have brought in money, you cannot take it back again. And my fear now is that I might be holding on applications of (repatriated) funds which have already taken flight again,” the KRA commissioner for domestic taxes, Elizabeth Meyo, told an ICPAK meeting held in Nairobi yesterday. The accountants’ lobby hosted the meeting to review the impact of the cash wired from offshore accounts on the Kenyan economy.

“It’s an issue we are going to look at very critically because I am not seeing the impact of repatriated funds in the economy because Sh803 billion is a lot of money. If it’s true that it came back and it’s in the economy, we would have seen investments going up.”

The amnesty, which was announced by Treasury Secretary Henry Rotich in 2016, was aimed at attracting wealthy Kenyan investors who had opted for offshore investments in an attempt to mask the source of their wealth.

Analysts opine that some individuals could have used the amnesty to clean dirty money and later ship it out to foreign capitals that could have questioned the initial origins of the income and assets. Previously, the income, a significant part suspected to be stolen or acquired irregularly, was stashed in secret bank accounts in countries like Switzerland, Cyprus, Liechtenstein and Channel Islands.

Wealthy Kenyans have traditionally stashed wealth abroad to either escape the taxman’s scrutiny or to spread their risks by investing in the more politically and economically stable Western democracies.

A report by an American think tank, the National Bureau of Economic Research (NBER), last year revealed that Kenya’s super-rich were holding more than Sh5 trillion in offshore tax havens across the world.

The money that KRA says was repatriated in the three-year period is equivalent to about 30 per cent of national wealth or gross domestic product (GDP)

With the return into the country of close to Sh1 trillion, the owners of the cash have effectively ‘cleaned’ their wealth and evaded any questions on the source of the money or any tax liabilities that may have been due in the years before they made the declaration.

The colossal amount has, however, not made a visible impact in the economy, raising questions on where the cash has been kept or invested.

“The amnesty could actually have offered a chance for persons to bring in illicit cash, cleanse it and then ship it out as clean money,” said Samuel Kiautha of Sam & Associates, the consultant for Institute of Certified Public Accountants of Kenya (ICPAK) who guided the study on the impact of amnesty.

Mr Rotich last year amended the law to exempt the beneficiaries from the requirement to declare the source of their wealth to the Financial Reporting Centre — a State agency that tracks illicit money.

A newly released report by New World Wealth says the high-net-worth individuals in Kenya stash their money in foreign banks.

The report stated that about 50 per cent of these high-net-worth individuals are elite with political connections.

This backs the trend captured in a 2007 report by risk advisers Kroll and Associates that revealed how people close to retired President Daniel arap Moi set up shell companies, fronts and secret trusts to siphon Kenyan taxpayers’ money, which they stashed in banks, real estate and companies in about 30 countries around the world.

Ms Meyo said only Sh78 billion, or 9.7 percent, of the value of assets declared for repatriation was in Kenyan shillings, with filings in US dollars forming the bulk of assets declared for repatriation.

The Proceeds of Crime and Anti-Money Laundering Act 2009 requires persons transacting Sh1 million and more to declare the source of their wealth to the FRC, the anti-money laundering agency.