KRA has now acquired the ability to exchange tax information with 130 jurisdictions globally following ratification of the Mutual Administrative Assistance in Tax Matters (MAC). Kenya’s Ambassador to France, Prof. Judi Wakhungu (EGH), recently presented the instrument for depositing at the Organisation for Economic Cooperation and Development (OECD) headquarters in Paris, France.
This convention will go a long way in enabling KRA to fight against cross-border tax evasion and avoidance schemes. The pact is aimed at providing administrative assistance to various agencies in tax matters. This is implemented by promoting international cooperation on exchange of information between the jurisdictions to enable them combat international tax crimes while respecting the fundamental rights of taxpayers.
Other administrative assistance covered in the convention include; spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection
The agreement will facilitate KRA’s audit and investigation teams handling multi-national audits who require information that is usually not disclosed by the taxpayers. This information will be utilised to enhance the quality and accuracy of the audits and investigations, thus enhancing domestic revenue mobilisation. The convention will also boost the fight against corruption and address illicit financial flows, including money laundering and terrorist financing in the country.
The OECD and the Council of Europe developed the MAC jointly in 1988. It was later amended by a protocol in 2010, following the G20 Summit in London that allowed nonOECD members to sign the MAC. The OECD mandated the Global Forum on Transparency and Exchange of Information for Tax Purposes (GF) to implement the MAC.
Some of the taxes covered by the convention include Income Tax, Capital Gains Tax, Excise and VAT. Jurisdictions participating in the convention have a general obligation to exchange any information relevant to the partner administration or enforcement of their domestic tax legislation. This information is exchanged either upon request, automatic or spontaneous exchange, or through simultaneous tax examinations abroad.
Exchange of Information (EOI) involves tax authorities exchanging information for taxation purposes through designated Competent Authorities (CAs) based on a legal instrument that allows for these exchanges. In Kenya, KRA has authorised representatives for Exchange of Information on request. Apart from MAC, other legal instruments used for EOI are Tax Information Exchange Agreements (TIEAs) and Double Taxation Agreements (DTAs). Kenya does not have any TIEA in force, therefore, exchange of information is carried out on the basis of the 15 DTAs that are currently in force. The MAC will therefore be significant as it provides Kenya with more jurisdiction to exchange information with.
By Beth Mwobobia
Exchange of Information EOI), KRA