Pressure builds on EU to blacklist tax havens

By Steve Umidha

Pressure is mounting on European Union (EU) to cast a wider net when listing tax havens and to consider imposing stricter sanctions for countries facilitating tax avoidance.

A statement by The OpenLux Investigation, has called for a discussion on whether current rules provide adequate defense against tax evasion and pushes for more transparencies and sanctions, if it is to protect vulnerable counties like Kenya.

“It is time to make multinationals’ tax affairs more transparent by introducing Public Country by Country Reporting to show the revenue, profits, taxes paid in each of the countries where the multinationals operate,” reads in part a statement seen by Business Hub.

OpenLux has further urged the EU to work towards the creation of an EU wealth asset register, to record and make more transparent beneficial ownership of assets across each of its member states.

Corporate tax rates in practice in the UK, Switzerland and Luxembourg – well known tax havens range from 10 per cent to 0.8 per cent – markets where Kenyan elites stash their stolen public funds. Mauritius and Dubai are also target markets for the corrupt.

Tax evasion is illegal but companies – especially those with global presence chose to reduce their bills by moving profits through countries or territories with lower taxes, including those with close legal ties to Britain like Kenya.

It is estimated that Kenya loses in excess of Sh55.1 billion in corporate tax per year from multinational companies abusing the law to shift profits to the United Kingdom, Switzerland and Luxembourg.

According to figures released in November last year by the Tax Justice Network (TJN) shows that for the first time, the extent of resources being lost placed Kenya among top African countries most exposed to the vice with Africa losing over $25 billion (Sh2.7 trillion) yearly mostly from corporate tax abuse.

Owing to the fact that taxation is a national sovereignty issue, the European commission can’t directly challenge the corporate tax laws of EU member states.

So the commission has instead been trying to use unlawful state aid laws to prevent tax avoidance in smaller countries.

Such rules are designed to promote market competition and prevent countries giving unfair advantages to companies.

As a result, the Independent Commission for the Reform of International Corporate Taxation. (ICRICT) is now calling on the European Union as well as other countries and global multilateral institutions, to seize this unique opportunity to impose effective transparency within its borders in order to put a real end to tax competition and to give back to the States precious and necessary resources to finance a fair and sustainable economic recovery.

“The EU should also put an end to harmful tax competition which has led to a race to the bottom in corporate tax rates by introducing a global effective minimum tax on corporate profits of at least 25 per cent,” it said.

Those tax havens are now believed to be growing in numbers, thanks to Double Taxation Agreements (DTAs) Kenya signed with some – and whose sincerity are now being question by some quotas who believe are being used in promoting financial secrecy and opacity in the negotiation of treaties, and their linkages to tax havens.

The vast majority of financial, businesses in betting firms, and real estate transactions are associated with illegal activity in this country, part of what underpins Kenya’s opulence in a steady stream of illicit proceeds from corruption and crime.