KENYA Country Profile

Tax Administration

Individual Corruption

According to the Transparency International Kenya East African Bribery Index 2009, citizens often encounter demands for bribes in interactions with the Kenya Revenue Authority.

Business Corruption

A large informal sector exists in Kenya in which tax evasion is practised through corruption and other kinds of fraud. A dialogue between the business lobby and the revenue authorities on this issue has begun, but has not yet shown visible results. The Kenyan banking system has allegedly been involved in money laundering and tax evasion scandals.

The alleged Charterhouse Bank scam, involving money-laundering and tax evasion activities in connection to about KES 18 billion, was exposed by whistleblowers in 2004. Investigators believe that the cost of the tax evasion and money-laundering that took place through the bank was equivalent to 10% of Kenya's national income, according to Transparency International's Global Corruption Report 2009.

Useful information on tax related issues can be found on the homepage of the Kenya Revenue Authority.

Political Corruption

Corruption is a major threat to the revenue base in Kenya. According to Global Integrity 2008, while revenue collection has improved, there are continual reports that well-connected people can manage to evade paying taxes. High-level government officials have been reported to use their positions and influence to provide their friends and their companies with tax exemptions.

Frequency

The World Bank & IFC: Doing Business 2010:
- A medium-sized company operating in Kenya must make 41 payments to tax authorities and spend 417 hours preparing, filing, and paying taxes at a total annual tax rate of nearly 50% of profits.

Transparency International Kenya: The East African Bribery Index 2009:
- Kenya Revenue Authority scores of 38.3%, placing the institution as the 10th most corrupt institution according to the citizens polled.

- The likelihood of encountering bribery in interactions with the Kenya Revenue Authority is reported to be 57%.

- 5% of respondents interacting with the police report that the consequence of declining to bribe was a denial of service.

- The average size of bribe paid to the Kenya Revenue Authority is KES 4,734.

Transparency International: Global Corruption Barometer 2009:
- 14% of households who had contact with tax revenue services throughout 2008 report to have paid a bribe.

Afrobarometer: Summary of Results Kenya 2008:
- 49% of household respondents believe that all or most tax officials are involved in corruption.

The World Bank & IFC: Enterprise Surveys 2007:
- 32% of companies expect to give gifts in meetings with tax officials.

- 61% of companies report that a typical company reports less than 100% of its sales for tax purposes.

- 32% of companies identify tax administration as a major constraint.