False invoicing eating into Kenya’s revenue
Kenya lost $907 million (Sh91.5 billion) in revenue through false pricing of imports and exports in 2013, according to a report released yesterday.
The report shows importers undervalue goods to shift money back abroad or to evade taxes.
Exporters on the other hand generate higher invoices to get higher tax refunds from the government.
Global Finance Integrity puts the amount lost through import mis-declaration at $767 million (Sh77.3 billion).
This composed of $324 million (Sh32.6 billion) in uncollected VAT tax, $229 million (Sh23.1 billion) in custom duties, and $214 million (Sh21.5 billion) in corporate income tax.
“This amount represents eight per cent of total annual government revenue as reported to the International Monetary Fund,” the GFI report states.
This is a conservative figure, as it does not encompass many aspects of trade mis-declaration and other illicit financial flows that do not show up in official statistics.
Kenya is a major exporter of coffee, spices and tea from which an estimated $140 million (Sh14.1 billion) was lost through mis-pricing.
The government offers incentives through tax on costs of imported materials used in local production to encourage exports, an opportunity the report says is exploited to quote higher prices in order to generate excess refunds from the government.