Letters

LETTERS: Go for auditors whose clients evade tax

tax

Real estate experts have cautioned investors to take 'careful consideration' of cultural, regulatory and tax matters in the region before sinking billions in the sector. PHOTO | SHUTTERSTOCK

A few weeks ago, the Capital Markets Authority imposed hefty fines on some former bank executives for breaching the code of ethics in corporate governance. The fines were computed to double amount on traced embezzled funds.

As if that was not enough, some of the affected individuals have been barred from holding management positions in any listed company for periods of up to 10 years.

The fines might have been punitive but they served as a good indicator to make managers holding such positions to be ethical and also instill some discipline in society where common decency is rare.

If we have to effectively achieve our national goals in terms of economic and social development, every regulator and other government institutions, they should benchmark with the CMA move.

For a long time, financial criminals have gone scot-free owing to inefficient justice system or laxity of regulatory bodies and concerned government institutions.

Goldenberg, Anglo-Leasing, maize scandals, Triton, NYS are all scams running into hundreds of billions yet the main architects went unpunished and kept their loot.

Year after year, the government reports a budget deficit, in 2017/2018 FY, it was an all-time high of Sh582 billion, which was 7.9 per cent of Kenya’s GDP. This is despite the fact that, tax evasion remains one of the biggest predicate financial crimes that largely go unpunished.

In 2015, Tax Justice Network - Africa (TJN-A), an affiliate of the African Union, gave a shocking report on tax evasion. The report titled High Level Panel on Illicit Financial Flows from Africa, it was estimated that Kenya loses more than Sh639 billion annually to tax evasion by multinationals corporations.

As per 2012 government estimates, less than 40 per cent of landlords pay tax on rent income. Even among these, most of them understated the amounts, with the total collections being less than five per cent of the Sh1.4 trillion annual tax collection.

It is, therefore, logical for the government to improve efficiency in tax collection among multinational corporations and landlords. Were this to happen, headache of budget deficits and underdevelopment due to lack of government funds could be automatically resolved.

Tax evasion is a predicate financial crimes but the Kenya Revenue Authority (KRA) and other government institutions seem either helpless or hesitant to pursue the culprits.
In all these cases, these companies are audited by well known and registered auditors.

For us to win the battle, if the government bent the arc of justice backwards and went for the auditors who are accomplices in the acts, much could be achieved.

On governance in the public sector, looting and abuse of office remain Kenya’s biggest cancer. Since 2013, the auditor general has continuously painted a grim picture of administration of public funds.

Governors and their associates have looted with abandon going by the audit queries, many of them unresolved while none of the suspects has been arraigned.

Political office has become the shortest route to instant but illicit riches. Again, our public institutions seem to turn a blind eye on the crimes.

For the few cases that have been prosecuted, they take too long to be considered and by the time they are heard and determined, a lot of water has passed under the bridge.

The Judiciary has not done well in serving justice in cases involving financial criminals. That is why nobody is shaken by the pronouncement of possible prosecution.

Suspects go through the process with negligible consequences.

The biggest paradox is that despite all this plundering, some culprits are appointed to higher offices with no regard to their past crimes.

What if, tax evaders were apprehended and fined double the amounts? Looters were apprehended, jailed and fined double the loot?

Thiong’o Irungu, Anti-Money Laundering officer.