Hello and welcome to evefinancialinsights blogs. Today we
are discussing Tax avoidance ways in Kenya.
Tax avoidance is a strategy that some individuals and
companies use to reduce the amount of taxes they owe. In Kenya, tax avoidance
has been a challenge that has cost the government a lot of money in lost revenue.
There are several ways in which individuals and companies can avoid paying
taxes in Kenya, and this essay will explore some of them.
One
of the ways in which individuals and companies can avoid paying taxes in Kenya
is by using tax havens. Tax havens are countries or territories that have low
or no tax rates. By registering a company in a tax haven, the company can take
advantage of the low or no tax rates and avoid paying taxes in Kenya. The
company can then channel its profits through the tax haven, which reduces the
amount of taxes it pays in Kenya.
Another
way in which individuals and companies can avoid paying taxes in Kenya is by
engaging in transfer pricing. Transfer pricing involves setting the price of
goods or services sold between related companies. By artificially inflating the
price of goods or services sold between related companies, the company can
shift profits to a subsidiary in a country with lower tax rates. This reduces
the amount of taxes the company pays in Kenya.
Some
individuals and companies also avoid paying taxes in Kenya by underreporting
their income. This involves hiding or not reporting all or some of the income
earned. By doing this, the individual or company reduces the amount of taxes
they owe. Some individuals and companies also understate their profits or
overstate their expenses to reduce their taxable income. This is known as tax
fraud and is illegal.
In
addition, some individuals and companies avoid paying taxes in Kenya by
engaging in cash transactions. By conducting business transactions in cash,
there is no paper trail, and it is difficult for the government to track the
transactions. This makes it easy for individuals and companies to hide their
income and avoid paying taxes.
Another
way in which individuals and companies can avoid paying taxes in Kenya is by
taking advantage of tax exemptions and deductions. Tax exemptions and
deductions are incentives provided by the government to encourage investment
and economic growth. However, some individuals and companies abuse these
incentives by claiming them for activities that do not qualify or overstating
their expenses.
Lastly,
some individuals and companies avoid paying taxes in Kenya by bribing tax
officials. By paying bribes to tax officials, they can avoid paying taxes or
reduce the amount of taxes they owe. This is illegal and undermines the efforts
of the government to collect revenue.
In
conclusion, tax avoidance is a challenge that Kenya faces. There are several
ways in which individuals and companies can avoid paying taxes in Kenya,
including using tax havens, engaging in transfer pricing, underreporting their
income, engaging in cash transactions, taking advantage of tax exemptions and
deductions, and bribing tax officials. The government needs to strengthen its
tax collection system to curb tax avoidance and ensure that everyone pays their
fair share of taxes.
