Tax Avoidance By Multinationals Hurt Developing Nations, says lobby group

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Multinational Corporations (MNCs) are continually denying Kenya billions of shillings in revenue by evading taxes through different means including dodging income tax on the hefty perks for their expatriates and use of opaque structures that render it very difficult for the taxman to collect his dues.

Civil society groups and organisations have in recent years lift the lid on how the corporations cheat taxes by declining to reveal the profits that their subsidiaries make in the country.

The Tax Justice Network Africa (TJNA) in 2015 estimated Kenya loses Ksh639 billion annually in tax evasion by MNCs even as the taxman is struggling to meet its targets and has turned the heat on local entrepreneurs and businesses.

It is on this backdrop that TJNA points out poorly drafted agreements signed between governments and multinational corporations may affect coming generations even more.

Many foreign-managed industrial mines, for example, in Africa are enclaved production structures which are tightly managed and whose activities are controlled internally.

While calling for a proactive approach in dealing with this, the lobby group noted MNCs together with accounting and legal firms gang up against the source of resources to avoid paying their fair share of taxes.

Fred Njehu, a Senior Policy Advisor at GreenPeace Africa cited coal mining in Kenya saying the community’s participation in stopping the construction of a coal mining plant in Kitui was attained through both legal means.

Additionally, theft by public service officers and those who are well connected has led to a thriving offshore accounts business. Questionably wealthy Kenyans are hiding trillions of the wealth stolen from Kenyans stymying economic growth in the country.

KRA has been banking on cross-border sharing of information and third- party data to curb fraud which is going to increase in scale as Kenya establishes itself as a regional hub with more expatriates coming in.

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