On April 29, 2025, the National Taxpayers Association (NTA) launched a critical research study in Nairobi.  

Titled “Concept of Illicit Financial Flows and Domestic Revenue Mobilization in Kenya”, the study reveals how hidden financial channels significantly drain Kenya’s public finances and create challenges to national and county budgets.  

Illicit financial flows (IFFs) involve the concealment, fabrication, or misuse of financial transactions to move money out of the country.  

These activities take various forms: corrupt individuals falsifying invoices to evade customs duties, companies manipulating intra-group pricing to reduce taxable earnings, and state officials diverting public funds into personal accounts. 

Kenya loses about eight per cent of its annual revenue to these transactions – billions of shillings that could fund critical infrastructure like roads and healthcare facilities.  

The NTA study emphasises that every shilling lost today means fewer public services tomorrow. 

Tax avoidance and evasion lie at the heart of the problem. Companies exploit loopholes in incentive schemes such as special economic zones and tax holidays.  

Some double-claim allowances or receive tax breaks without generating promised jobs or investments.  

The study recommends rigorous cost-benefit analyses before granting tax breaks and mechanisms to reclaim taxes lost through abuse. 

Abusive transfer pricing is another significant drain. Multinational companies sell goods and services to their affiliates at non-market prices, transferring profits to low-tax havens. 

Trade misinvoicing – under-declaring exports or overstating imports – reduced Kenya’s customs and VAT revenues by nearly $1 billion in 2018 alone. 

Criminal activities also drive illicit flows. Drug cartels launder money through banks, wildlife poachers sell ivory abroad and hide proceeds offshore, and corrupt officials divert kickbacks to shell companies.  

The report identifies weak witness protection, understaffed anti-money laundering units, and judicial delays as contributing factors. 

Devolution has introduced greater complexity. Counties depend heavily on national revenue sharing, meaning IFFs directly reduce county funding and force local governments to overtax small entrepreneurs like boda boda operators.  

The study recommends that countries implement well-defined tax regulations, digitise revenue collection, and introduce GIS-based spatial planning to track assets and reduce corruption. 

The NTA calls for a united approach, urging the Senate, Council of Governors, and Intergovernmental Budget and Economic Council to form an inter-agency task force. 

Recommendations include complete transparency on incentive awards, unrestricted access to beneficial ownership registers, and collaborative audits of high-value sectors. 

By uncovering and addressing IFFs, Kenya can redirect billions from hidden offshore accounts into hospitals, schools, and infrastructure that benefit its citizens. 

The youth should lead calls for a better Kenya. Here is another chance. 

The writer is a lawyer and a human rights advocate