Exposed: KRA fails to tax half of the Chinese imports

Imports of Chinese goods worth 431.9 billion shillings for the first 10 months of last year have not been found in the official data reported by the National Tax Authority (KRA), thus raising concerns about the level of tax evaded in the country in an election year.

An analysis of official trade data released separately by the tax authorities of the two countries revealed a significant difference in the value of goods imported from the Asian economic powerhouse.

Official KRA data, as published by the Kenya National Bureau of Statistics (KNBS), estimated the value of imports from China at 377.5 billion shillings during the reporting period.

However, the General Administration of Customs of the People’s Republic of China (GACC), which is equivalent to KRA, states on its website that goods exported from China to Kenya during this period were worth 809.4 billion shillings, more than twice two. . statistics provided by KRA.

The big difference can also call into question the amount of tax collected for goods imported from the country with the second largest economy in the world, as goods exported to the country are subject to many charges, including customs duties. , Value Added Tax (VAT), Excise Duty, Customs Duty, Import Declaration Fee (IDF) and Railway Development Fee (RDL).

Kenya is grappling with the problem of commercial invoicing, where imports or exports are misquoted at ports to avoid paying customs duties. This type of tax evasion can also occur when there is an under-invoicing of imported goods, which can lead to under-payment of VAT and customs duties due to under-valuation of the goods.

With commercial invoicing, importers can under-declare the price of an imported product, such as a phone, or buy 10 phones but declare only two, common with import consolidation.

But the difference can also give evidence to the report that a large number of goods disguised as transit goods end up being dumped in the country heading to different places in the region to avoid taxes.

Imported goods are taxed from zero percent for raw materials to 10 percent for intermediate goods and 25 percent for finished goods.

Except for a few non-exempt products, VAT is charged at a standard rate of 16%, while imported goods are subject to different rates of duty as stipulated in the Excise Duty Act 2015. duty.

Imported goods are also subject to Import Declaration Fee (IDF) of 3.5% and Railway Development Fee (RDL) of 2.0%.

With this shortfall, KRA may have lost at least 66.95 billion shillings in tax revenue from the 10 percent customs duty, IDF and RDL alone, an amount that could rise to 135.95 billion shillings if you increase the tax to 25%, which is levied on finished goods, and 16 percent VAT.