Listen to This Article Enhance your reading experience by listening to this article.

Kenya lost an estimated Sh62.2 billion ($565.8 million) in tax revenue loss annually due to illicit financial flows, East Africa Tax and Governance Network (EATGN) has said.

The tax network equates the loss to 36.02 per cent of the country’s entire public health expenditure, or the annual salary of 240,781 nurses.

International financial flows refers to all cross-border financial transfers which contravene national and international laws including proceeds of corruption, extortion, tax evasion, tax avoidance, money laundering and hiding wealth offshore among others.

Passenger revenue

“There is a problem. We (Kenya) are becoming a hub. We are definitely not doing well,” said EAGTN executive director Leonard Wanyama yesterady at a Nairobi hotel during a conference on illicit financial flows.

“You can clearly see that there is a consistency in one thing, the numbers keep growing with every report that comes out,” he added.

Of Kenya’s Sh62.2 billion in losses, about Sh7 billion ($63.4 million) was lost due to offshore tax evasion, according to Wanyama.

The biggest source of illicit financial flows in the region is commercial activities (62 per cent) followed by criminal activities and corruption at 33 per cent and five per cent respectively.

Irene Boke, a program officer at Transparency International Kenya said illicit flows shows  on the back of inadequate growth, high levels of poverty and the prevalent corruption.

“They undermine the country’s economic, political and social structures and weakens the country’s institutions and the capability to fight poverty,” she said.

Boke said bad governance and corruption robs Kenya of Sh270 billion ($ 2.5 billion) equivalent to 25 to 30 per cent of the government’s annual budget. Kenya is the biggest loser in East Africa as far as tax revenue loss is concerned followed by Tanzania at Sh32.9 billion ($299.5 million) and Tanzania at Sh12.7 billion ($115.4 million). Burundi has the lowest total revenue tax loss in the region at Sh218.3 million ($1.99 million).

Unfortunately, according to EAGTN, Kenya and Rwanda are in a race to the bottom with both competing to put in place measures to attract foreign investors but at the same time making it harder for themselves to raise revenue locally.