26 February 2020 by Romy van der Burg, Hans Nauta and Linda van der Pol
Dutch flower growers in Kenya avoid corporate taxation (on income, dividends and capital gains), using transfer pricing between the Kenyan subsidiary and a parent company in (mostly) the Netherlands and offshore constructions in i.a. The Bahamas, the British Virgin Islands and Jersey.
These practices result from expectations of shareholders, an intense competition on the market (margins are very small), an aversion to the amount of tax that is to be paid in Kenya (30%), and a lack of trust in the Kenyan Revenue Authority and the government.
The loss of tax revenue due to these practices is substantial and has large consequences for the Kenyan society and its inhabitants, such as the increase of “easy to collect” taxes and the lack of investments in public goods. These consequences keep Kenya’s inhabitants poor and restrain easy/open access to healthcare and education.