Businesses & Financial News

Report shows tax haven countries bending tax rules, including Kenya

By Steve Umidha

The 2021 Corporate Tax Haven Index (CTHI 2021) sees the member countries of the Organisation for Economic Co-operation and Development (OECD), or their dependencies, take up the top six spots on the ranking of the world’s greatest enablers of corporate tax abuse.

These are Luxembourg, Switzerland, the Netherlands, and the United Kingdom Overseas Territories (the British Virgin Islands, Cayman, and Bermuda). Besides, the CHTI 2021 finds OECD countries and their dependencies responsible for 68% of the world’s corporate tax abuse risks.

Yet, most African countries signed double taxation avoidance agreements (DTAA) with some OECD countries or dependencies. Indeed, Kenya and the Netherlands have a DTAA. Ghana has DTAAs with the United Kingdom, Netherlands, and Switzerland.

Therefore, OECD countries are great contributors to tax revenue loss from the African continent. Dr Dereje Alemayehu, the executive coordinator of the 2021 Nobel Peace Prize-nominated Global Alliance for Tax Justice, said, “to trust the OECD in light of the index’s findings today is like trusting a pack of wolves to build a fence around your chicken coop.”

This is a further trust deteriorating blow of the OECD group’s ability to tackle the rampant
global corporate tax abuse that costs the world $245 billion in lost corporate tax a year. It also
demonstrates that African countries are opening themselves to tax havens’ exploitation.

Indeed, the 2021 CTHI shows that Africa holds a 4.15% share of the global corporate tax haven, the bulk of which, 2.3%, owes Mauritius, followed by South Africa (0.45%), Liberia (0.42%) and Seychelles (0.37%). These three aggressive tax havens offer a zero corporate income tax rate, and allscore bad on Category 3 (Transparency) and 4 (Anti-Avoidance).

Estimations show that multinational corporations shift 5.4 billion in profits to Mauritius, causing 0.96 billion tax losses to other countries. Tax Justice Network Africa’s Executive Director, Alvin Mosioma, argues that ‘‘contrary to popular claims, DTAAs signed by African countries with tax havens do not lead to increased investments.

African countries’ efforts to achieve sustainable development goals will remain a mirage if these countries do not stem Illicit financial flows and invest in building equitable tax systems’’.

The OECD held the global tax setting power for 60 years yet faced wide criticism for failure to
deliver meaningful change in its long-awaited tax reform proposals.

Today’s CTHI 2021’s finding reemphasise the once impossible notion of shifting that power to the United Nations with UN tax convention, which the UN High-Level Panel on International Financial Accountability, Transparency and Integrity (FACTI) calls for.

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