Kenya urged to expose cartels running offshore companies

By Patrick Onyango & Serah Makau

A list of the owners of “shell” companies where firms keep money offshore to avoid tax should be published to discourage tax evasion, Tax Justice Network (TJN-A) urged on Wednesday.

Tax Justice Network’s Anglophone African Hub Researcher, Rachel Etter-Phoya in her presentation at the ongoing virtual forum for tax justice advocates in Africa, the tax expert said that the “cloak of secrecy” surrounding company ownership enables questionable practice and increases the risk of illicit financial flows.

To achieve that, Ms. Etter-Phoya recommends the disclosure of the real owners of companies and other legal vehicles. Progress is being made, but no country in the world has achieved an ideal level of transparency. This is something all countries, including Kenya, must strive for.

Over the years, Kenya – the largest economy in East Africa has been faulted as the region’s complicit country in helping individuals hide money from the rule of law, a tag that has shielded potential investors from investing in the country.

A recently undertaken study by Financial Secrecy Index (FSI) on selected global economies, showed that, the country’s influential institutions were aiding the high and mighty both in public and private sectors to siphon public funds and move the ‘black money’ to tax havens with the help of western consulting firms.

“Kenya’s financial sector is highly secretive,” the Financial Secrecy Index released last year reads in part. The country scored 76 out of 100 in terms of secrecy – a worrying statistic for an economy believed to be growing at a slower pace despite its huge potential.

The Financial Secrecy Index ranks each country based on how intensely the country’s legal and financial system allows wealthy individuals and criminals to hide and launder money extracted from around the world.

A higher rank on the index does not necessarily mean a jurisdiction is more secretive, but rather that the jurisdiction plays a bigger role globally in enabling secretive banking, anonymous shell company ownership, anonymous real estate ownership or other forms of financial secrecy, which in turn enable money laundering, tax evasion and huge offshore concentrations of untaxed wealth.

A highly secretive jurisdiction that provides little to no financial services to non-residents, like Samoa (ranked 86th), will rank below a moderately secretive jurisdiction that is a major world player, like Japan (ranked 7th).

“The aim is not to penalize jurisdictions with greater scale, but simply to recognize that their secrecy poses greater risks – and so it is more important that they behave responsibly,” the report notes.