The Kenya Revenue Authority (KRA) has been trending across all media platforms after the commissioner general implied in a media statement that individuals displaying opulence on social media shall be subjected to tax. This has elicited a lot of excitement with all manner of jokes and memes flowing on social media. The remark by the chief taxman is a statement that the current generation might want to wish away. Driven by slogans like, “fake it till you make it”, “you only live once” (YOLO) “get rich or die trying”, everyone is out on social media to make a display. The tax man has been watching and the decision to take a taxation angle on display of opulence is not a thought out of the blues.
Five years ago, the head of state instructed the KRA to execute what Kenyans are now taking lightly. In his speech during the annual tax-payers’ day on 31 October 2016, President Kenyatta directed that high net worth individuals whose lifestyles were not reflective of the taxes they pay, if any , must be compelled to demonstrate their sources of wealth and to contribute their share of taxes accordingly. He added that use of technology as an enabler of tax compliance is an immediate necessity and KRA must incorporate cutting edge technology.
There is nothing new with the Presidential directive and the commissioner general’s remarks are not mere threats or jokes. Modern tax systems, Kenya included, are based on self-assessment where taxpayers declare their incomes. Temptation to under-assess oneself to tax is common to mortals and that’s why the commissioner is empowered by section 29 of the Tax Procedures Act 2015, to make a default assessment. Lavish lifestyle must be supported by income which if not declared, the commissioner then invokes this section. Bear in mind that all income is taxable including income from illegal sources, save for a few expressly exempted from tax.
As KRA warms up to make good their plans, their counterparts from the developed world have already covered much ground. The Australian Revenue Organization, ATO, has initiated tax audits on over 300,000 Aussies who own luxury boats, cars and thoroughbred horses. Investing in such luxury items is enough to catch the eye of the taxman. In France, the Budget Act 2020 gave the Tax and Customs Authorities the powers to sift through taxpayers’ social media postings using artificial intelligence. This move was challenged in French courts on grounds of infringement of data privacy but the courts argued that information on social media was already public and so availed by the owners.
So what’s the implication of this proposal to the netizens? It’s obvious that there will be less bragging and flossing on social media. If that be the case, then taxes will have served their role of enforcing morality in the society. You see, most of the celebrities are living a lie, chasing clout, some are not as rich as they pretend. This puffed up life is misleading to our youth and working against the ethos of hard work and contentment in life. The desire for soft life is sponsoring get-rich-quick strategies (some of which are unethical) and unspeakable depression to those who fail to make it.
It is an open secret that some individuals live big out of clandestine sources. Money laundering, drug dealing, corruption, swindling and cyber-crimes can be linked with celebrity culture. White collar crime is difficult to prosecute yet so visible in society. That’s when the taxation powers become an adjunct to criminal law. Al Capone, a criminal mastermind in Chicago USA, controlled drug cartels, brothels and casinos. He literally got away with all crimes including the infamous 1929 Valentine day massacre. On his fateful day before the courts, Al Capone came down tumbling on grounds his lifestyle could not match his taxes. On 8 October 1931, he was charged with 23 counts of tax evasion and would later die in jail. Where criminal law had failed, tax laws saved society from this serial killer. Taxes loaded with penalties are lethal in flushing out underground activities.
There is nothing wrong with witch-hunting witches