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Civil society groups in Kenya push for laws to criminalise tax evasion

By Moses Michira | August 11th 2015

NAIROBI: The civil society in Kenya wants Parliament to join them in the push to end tax evasion through enactment of laws that enhance compliance from international trade.

This, they argue, will boost revenue collection by the State. They say tougher laws will criminalise tax avoidance and spell harsher penalties for offenders.

Such legislation will help agencies such as the Kenya Revenue Authority increase collections from corporations, after the bid to establish a tax body under the UN failed last month.

Developed nations including the US and UK were successful in blocking debate on the proposal of a UN-backed tax body at a global meeting held in Addis Ababa mid last month.

This meant that the Organisation for Economic Co-operation and Development (OECD) would continue to provide rules on international trade. “We can no longer let others drive our development agenda,” said Tax Justice Network Africa Executive Director Alvin Mosioma.

More than 100 delegates are attending the week-long conference at Maanzoni Lodge, Machakos, and are expected to lead a continent-wide legislative agenda on taxation.

Poor countries have claimed that OECD, which draws its membership from 34 rich nations, had developed guidelines that helped large corporations avoid tax payment.

Transfer pricing is the most abused method employed by multinationals to deflate earnings in some countries, while shifting the profits to other countries with friendlier taxes (tax havens). Several Kenyan firms have for instance set up phony subsidiaries in countries such as Mauritius and the United Arab Emirates where corporation tax is zero. Aggressive tax planners would help such firms to book most of their earnings in the tax havens, leaving the local subsidiaries to book losses.

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This means they do not pay corporate tax, charged at 30 per cent of the booked profits.

Global corporations such as Google and Starbucks have exploited weaknesses in the OECD rules to significantly lower their tax bills, raising the debate on profit shifting to beyond just the developing countries.

A panel that is investigating tax avoidance in Africa led by former South Africa President Thabo Mbeki reported that the continent was losing more than Sh5 trillion annually in unpaid taxes.

Now, a group of 20 MPs drawn from Africa including Kibra’s Ken Okoth have been appointed as ambassadors in their respective parliaments to drive the tax avoidance agenda.

Tax Justice Network Africa Senior Advisor Dereje Alemayehu told the delegates that developed countries had refused to admit the poorer nations to the OECD because they did not want to change global trading rules for the benefit of all.

“If you are not at the table, you are on the menu,” Mr Alemayehu said, in reference to the objection to open up OECD membership. UN boss Ban Ki Moon had asked the rich countries to be sympathetic to the needs of the poor States during the recent Addis meeting.

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