Kenya is planning new measures to stop foreign multinational companies from evading the payment of tax through poor recording of trade transactions, a government official said.
Kenya Revenue Authority (KRA) Commissioner General John Njiraini said last week, Nairobi was getting ready to open an international tax office to monitor cross-border transactions.
Kenya will create an international taxation center to help in the global crackdown on tax avoidance, he said.
Njiraini said the formation of the international tax office would enable Kenya to stop the tax evasion.
The measures sought by the Kenyan government aim to stop most countries in Africa from losing huge sums of money through tax avoidance mechanisms through complex accounting systems.
Most countries lose revenue through foreign multinationals because the firms fail to provide the proper accounting of incomes and other corporate earnings.
KRA announced it was moving towards the formation of the tax office amid a drop in the collection of national revenues. The drop was caused by a recent fall in the corporate earnings of firms operating in Kenya.
Most African countries, including Kenya, have been victims of tax cheats, mostly those operated by foreign firms which engage in illegal measures such as transfer pricing, where the parent company fails to properly account for earnings of their subsidiaries.
The government of Kenya is also keenly observing the activities of the foreign firms as well as local commercial banks that lend to directors of the companies internally.
When the tax office becomes operational, it would be used to monitor the activities of organizations and stop tax avoidance systems by foreign multinational firms, Njiraini revealed.
Kenya is a party to international initiatives to stop the avoidance of taxation.
Njiraini said the efforts to stop tax avoidance would also include the installation of additional machines at national and international airports to stop tax evasion.
“We are focusing on international taxation,” Njiraini told reporters.
