Businesses & Financial News

Kenya among countries hit hard by global tax abuse

By Steve Umidha


Kenya is among countries paying a heavy price in tax losses being committed by multinational corporations and wealthy individuals.

A new study by the Tax Justice Network, the Global Alliance for Tax Justice and the global union federation Public Services International – estimates that countries globally lose over $483 billion in taxes each year with developing countries bearing the greatest brunt.

The amounts according to the study is lost through abusive tax regulations and loopholes in higher income countries, such as UK, which is responsible for over a third 39 per cent of the world’s tax loss.

“The $483 billion lost to tax havens a year is the tip of the iceberg. It’s what we can see above the surface thanks to some recent progress on tax transparency, but we know there’s a lot more tax abuse below the surface costing magnitudes more in tax losses,” states Miroslav Palanský – a Tax Justice Network data scientist.

The report further found that of the $483 billion in tax that countries lose a year, $312 billion is lost to cross-border corporate tax abuse by multinational corporations and $171 billion is lost to offshore tax evasion by wealthy individuals.

The amount according to the report’s drafters is enough to fully vaccinate the global population against Covid-19 more than three times over.

This comes barely months following the publication of the Pandora Papers, a significant investigation into how world leaders and public officials use offshore tax havens to hide assets worth hundreds of millions of dollars at the expense of their struggling citizens.

It profiled highly-placed individuals, accusing them of using slapdash transactions and weak financial systems to circumvent the law to dodge paying their share of taxes while hiding the loot in foreign accounts also known as tax havens.

“Another year of the pandemic, and another half trillion dollars snatched by the wealthiest multinational corporations and individuals from public purses around the world,” wondered Alex Cobham, Chief executive at the Tax Justice Network.

A recent report by Oxfam shows that Kenya loses an estimated Sh114 billion each year due to tax exemptions of global corporations.

The amount is nearly double the amount the National Treasury allocated for the health sector in this year’s fiscal budget and a third of the Sh327 billion it borrowed from the China Exim Bank to build the Nairobi-Mombasa standard gauge railway.

The firm links tax exemption with increasing poverty levels in the country, validating past reports on the role tax-dodging multinationals play in condemning millions into abject poverty.

In fact Kenya was last year put on the watch list of notorious countries helping individuals hide money from the rule of law as the EU Commission commences legal actions against Luxembourg over laws to prevent money laundering and tax avoidance.

Undercover reports found East Africa’s largest economy was assisting well-placed personalities to siphon public funds and moving them to offshore countries like Mauritius and Luxembourg with the help of western consulting firms.

EU promised it would step up scrutiny of financial assets controlled by politicians and company owners in an effort to clamp down on money laundering.

“The criminal investment of proceeds and trade in illicit commodities is interlinked with tax avoidance and money laundering. Luxembourg has not yet fully applied to these new rules,” read a statement from the EU Commission.

EU legal actions were approved in May 2018 and had been thought would lead to fines if member states do not apply common legislation. Kenya is a member country.

The TJNA is now recommending an introduction of an excess profit tax on multinational corporations making excess profits during the pandemic, such as global digital companies, in order to cut through profit shifting abuses.

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