Civil society organization blame tax evasion for rising debt levels

Anglo Leasing debt hits Ksh.17.5 billion despite payments suspension

It is now emerging that companies are the highest sources of illicit financial flows in the country.

According to the African Forum and Network on Debt and Development (AFRODAD), illicit financial flows emerging from commercial activities account for 68 percent of all illicit financial flows compared to illicit flows as a result of corruption or criminal activities.

The government is currently mulling the possibility of reviewing the country’s public debt ceiling from the current 9 trillion shillings to 12 trillion shillings owing to revenue shortfalls as the pandemic continues to cripple the economy.

Although the missed revenue targets as a result of the pandemic have been partially attributed to the government’s high appetite for debt, civil society organization Transparency International Kenya says ours was a dire situation way before the pandemic hit.

“As a country we had issues with our public debt seeing as our debt to GDP ratio kept on raising prior to the pandemic and we could no see finalised projects financed from the borrowed funds. From our research Kenya has borrowed 1739 us dollars during the covid period but the figure were higher before that so we do not think covid19 has affected it.”said Irene Boke, program assistant, TI

As of December 2020, the stock of Kenya’s public debt stood at Ksh.7.281 trillion which comprised Ksh.3.48 trillion in domestic debt and Ksh.3.79 trillion in external debt.

Although the recent proposal by the National Treasury to increase the debt ceiling speaks of the government’s growing appetite for debt, AFRODAD says the corporates are equally to blame to not paying their fair share of taxes.

“Commercial related illicit financial flows accounts for about 65 to 68 percent of all illicit financial flows in stark contrast to those related to corruption or criminal activities. Collectively is a contributor to the indebtedness here in Kenya and also in Africa. This is the deliberate set up by companies to evade taxes,” said Jason Braganza, AFRODAD.

In light of the high level of public debt, Fatuma Ibrahim Ali, the East African Legislative Assembly (EALA) Member of Parliament, is working to table a motion in the regional assembly that will help stem the illicit financial flows.

“Kenya is in crisis in terms of combating corruption and illicit financial flows. The motion seeks to address corruption and illicit financial flows in the East African community,” said Ali.

A 2020 report by United Nations Conference on Trade and Development (UNCTD) estimated that Ksh.9.7 trillion, leaves the African continent as illicit capital flight.

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