Kenya's Tax Cheats

Wealthy Kenyans are learning from their peers around the world by constantly seeking elaborate schemes to protect their money and keep it away from the tax man at all costs. Private tax consultants are paid top dollar to devise means of routing investments the world over through layers of ownership structures deliberately designed to fool tax regimes.

Philip Muema, the managing partner at Nexus Business Advisory, said most high net-worth individuals prefer to spread risk by investing in various jurisdictions. “It is in everybody’s interest to pay the lowest possible taxes as long as it is not illegal,” Muema, who has previously been a partner at global consultancy firm KPMG in Kenya said. Many Kenyan businesses are owned by shell companies domiciled in countries where the tax rates are near zero.

Such parent companies, some owned by Kenyans, extend loans to local subsidiaries ensuring that most of the earnings made are shipped out to settle the debts in the jurisdictions where the income is hardly taxed. In that way, the owners of the business have effectively been cushioned from the harsher taxation schedule at home.

Before the tax havens, Kenya too was once a preferred destination for off the books big money investment. At the height of the piracy menace along the Indian Ocean coastline, Kenya was the go to destination from the heists.

Investment experts partly attribute the Nairobi real estate boom to this period, when the market was awash with unbankable money that was used to buy off properties in Kilimani, Kileleshwa, Eastleigh Nairobi West and South C as well as finding their way into the hospitality industry with hotels being bought off in Nairobi and Mombasa as a laundering scheme. All this from ransom money, paid to cartels operating off the shores of Kismayu with connections in Nairobi and European capitals. Proceeds from this period of lax financial laws in the country also made it to the transport sector, where many put their money in matatus as a form of legitimising income from dubious sources.