How tax amnesty helped Kenya recover stolen public funds in foreign banks

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An extended tax amnesty program in Kenya has seen wealthy citizens file to return up to $1.18 million in assets from foreign countries.

According to reports, the value was declared for repatriation in the period ended June 2019, after the Treasury had extended the tax pardon process by a year.

Generally, the objective of tax amnesty is to pardon or negotiate the tax liabilities of individuals and corporate taxpayers in line with laid down laws. Widely used by several African countries, notably in Nigeria and South Africa, it attempts to regularize the tax affairs of persons and companies who have defaulted in meeting their tax obligations; improve the tax compliance culture and widen the tax net.

Three years ago, the Kenyan government introduced a one-year tax amnesty for citizens holding money in bank accounts overseas, through an amendment to the Tax Procedures Act in the Finance Act of 2016. The pardon was subsequently extended two times to reach 2019, a move that was attributed to its slow uptake by suspended Treasury Secretary, Henry Rotich.

“In 2016, the Tax Procedures Act was amended to provide a tax amnesty on income declared for the year 2016 by a person who earned taxable income outside Kenya. In 2017, I extended the period from December 30, 2017, to June 30, 2018, for the year of income 2016,” he said last year.

However, despite the extension, Rotich explained that the uptake of amnesty was low partly due to concerns that when the funds are returned, questions will be raised regarding the source as required by Financial Reporting Centre, Kenya’s anti-money laundering agency.

Subjecting the repatriation to the provisions of Proceeds of Crime and Anti-Money Laundering Actwould require individuals transacting $10,000 and more to declare the source of their wealth to the anti-graft agency.

“In this regard, and in order to encourage the uptake of the amnesty, I propose to extend the period of amnesty from June 30, 2018, to June 30, 2019, and the year of income declaration to be 2017,” Rotich said at the time.

As contained in a report submitted to a National Assembly Committee, the one-year extension of the program, with an assurance of the non-involvement of anti-graft inquiry, saw the Kenya Revenue Authority (KRA) receive 3,543 amnesty applications in the period to June this year.

“The amnesty was extended for a further year and assurance given that once the money is transferred, there will be no follow-up on the source of the funds,” KRA said in the report. “The amendment was meant to allow more time for persons seeking amnesty and create (a) favourable environment for repatriation of funds.”

Moreover, the KRA told to the Business Daily in May that about $10 billion had been declared by 16,000 applicants since the window opened. While the amnesty covers almost every Kenyan resident, the exemption excluded people who got their riches abroad from crimes such as terrorism, poaching, and drug trafficking.

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