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US Research Firm Reports Multinational Companies Robbed $860M From Kenya

Posted byBy Thomas L. Scott | Published on: CommentsComments (2)

Tax evasion and corruption resulted in Kenya being robbed for more than Sh78 billion ($863 million), according to Global Financial Integrity (GFI).

The US- based research firm found that the losses were larger than the combined foreign direct investment and aid given to Kenya.

But Kenya isn’t the only country getting robbed.

“These outflows—already greater than the combined sum of all FDI and aid flowing into these countries—are sapping roughly a trillion dollars per year from the world’s poor and middle-income economies,” GFI President Raymond Baker, a financial crime specialist, told the Standard Digital.

“GFI research estimates that illicit financial outflows cost African (both North and Sub-Saharan African) economies US $55.6 billion per year from 2002-2011,” according to a GFI press release.

Between 2003 and 2012, the report said Sh 600 trillion ($6.6 trillion) was illegally taken from developing economies around the world. In 2003 alone, tax evasion, corruption, crime and other illegal outflow resulted in Kenya losing Sh24.5 billion, according to the GIF report.

The report also states that the outflows are increasing at a rate of 9.4 percent per year, which is twice as fast as the global GDP.

“These findings underscore the urgency with which policymakers should address illicit financial flows,” Dr. Dev Kar told the Standard.

Kenyan authorities say that tax evasion by multinational firms has contributed to Kenya’s huge budget deficit and large revenue collections. The Kenya Revenue Authority (KRA) reported that such firms have stolen more than Sh30 billion from the Kenyan government.

The most common form of illegal outflow is done through mis-invoicing. Multinational firms book their expenses in poor countries in order to shift the profits to a sister company in a jurisdiction with lower taxes, the Standard says.

The GFI found that 77.8 percent of all illicit flows were through fraudulent mis-invoicing trade transactions.

The GFI report shows how big an impact the illicit outflows are having on poor and developing countries.

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