There’s nothing new in Pandora Papers
XN IRAKI | By XN Iraki | October 10th 2021
The name given to the documents leaked the other day, Pandora Papers, alluded to Greek mythology, arousing our curiosity and emotions. The presence of our president on the list made matters more interesting and Kenyan.
In a curious twist, President Uhuru Kenyatta responded and left us waiting for a more comprehensive response.
His view that the leakage was a positive development and would enhance financial transparency and openness in Kenya and globally was nothing but brinkmanship, like pricking a balloon.
It has been confirmed that other State officers have such accounts after informing the anti-corruption commission.
It would be interesting to find out who else is on the list. My hunch tells me you will find non-entities as proxies. It is not every Kamau, Onyango or Abdul who opens such accounts.
The public do not have local accounts, let alone foreign ones. To the public, even the term tax haven is confusing. They would probably understand if its ‘heaven’, not that I am condescending to the Kenyan public.
No wonder MCAs and others representatives love travelling abroad. Such travels are seen as prestigious, just like offshore accounts. After all, we all long to be rich and affluent, only that circumstances do not allow.
Offshore account holders are in two classes; the corrupt and the clean. The corrupt want to hide their ill-gotten money.
That sends shivers down my spine. What if that money is put into wrong use such as influencing the voting patterns or fomenting social strife or chaos?
Money acquired fraudulently is likely to be put into illegal use. That is why corruption is so corroding to the society.
The other class is the rich and affluent who want to diversify their portfolios. They do not want to put all their eggs in one basket.
Such accounts reduce the burden of business transactions and protect the value of someone’s wealth because it’s often held in dollar or other strong currency.
But why tax havens? They assure you of secrecy and security of your money. Surprisingly, such accounts may not pay as much interest as Kenyan banks.
They could erode your wealth by charging a management fee, but the security and anonymity largely balance out the low or no interest.
It is like working for the public sector, you don’t get paid very well but your job security is high.
It is instructive that tax havens are not just small islands in the Caribbean, but developed countries such as Singapore, Switzerland, Netherlands and USA, of all places. This leaves no doubt that tax havens have another use beyond shielding the owners. They bring money to the country, creating jobs and growing the economy. Maybe that money is later given to us as loans!
On this account, we should make Kenya a tax haven and enjoy the benefits. That includes jobs for lawyers, bankers, accountants and other professions. I recall many of my former students getting jobs in the Caribbean islands when the Sarbanes-Oxley Act was enacted in USA in 2002 after financial scandals involving Enron Corporation, Tyco International and WorldCom.
We could get enough money to loan to other countries. We can also look at the positive part of tax havens.
Tax havens suck money from other countries because of their perceived security and secrecy. What is the difference between tax havens and extraction of minerals and other resources from our continent by foreign powers?
Sending money to tax havens is a vote of no confidence in our economic system. Why not keep money here? We should not generate wealth here and take it away. Does taking money to tax havens indicate we need to reform our financial and tax system?
Maybe there’s something we can borrow from tax havens. Would making Nairobi an international financial centre reduce flows to tax havens? One hundred and thirty six countries (excluding Kenya) have set a minimum corporate tax rate of 15 per cent. How will this affect the tax havens? Will they become more innovative?
We should be bold enough to look at all the money leaving the country, and not just to tax havens. Lots of money leaves this country instead of being reinvested, yet we are always looking for foreign direct investment. The trick is to make the country so conducive that more Kenyans and foreigners would want to keep their money here.
Political stability is the starting point. I can bet lots of money leaves just before the polls, when uncertainty is highest.
The Pandora Papers will not have the expected political backlash in Kenya. The political class has mastered the art and science of spinning stories to their advantage. There are spin doctors on full pay or retainer. Another sensational story can always be used to ‘kill’ the unwanted one.
A few issues arise from the leak beyond exposing world leaders and their secret wealth. One, we knew the content of the Pandora Papers, there was no big surprise. We can say the Pandora’s Box was empty. All that information on who has money in tax haven was in the public domain, we only wanted confirmation.
You can only keep money in a tax haven if you have it, and we know who has the money in Kenya. We can worry on how they got it later.
Two, have we looked at the connection between dual citizenship and tax havens or offshore accounts?
Three, we should measure the amount of patriotism that flows in our blood. Should our leaders not lead by examples? Should they not suffer with us? Remember the economic growth when “Najivunia Kuwa Mkenya” was the national mantra? When we almost weaned ourselves off IMF and donors?
Let us not forget that the inflow and outflow of money is an integral part of global financial and trade systems. We should accept that money follows opportunities. As Kenya gets more developed, financial sophistication will follow. We hope that sophistication will be for the benefit of ordinary citizens, not a few people.
After all, most Kenyans will never leave this country, dead or alive.
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