According to data from the World Bank, about 1.4 billion adults globally remain unbanked. Many of these are low-income people in rural areas, especially women and youth and those with little or no financial literacy support.

Financial exclusion exacerbates rural poverty and erodes the capacity of individuals and households to withstand shocks.

Indeed, regions in Africa have been impacted by major climate, political and health-related shocks which not only restrain efforts for wider financial inclusion but also threaten the economic and social development gains achieved in reducing poverty among rural communities.

However, there is a silver lining. Over the last decade, financial inclusion has continued to gain traction and supports many of the United Nations’ Sustainable Development Goals (SDGs).

It is a critical component in reducing poverty and improving the standard of living of millions of people left out of financial systems.

Account ownership in developing economies, for example, grew from 63 percent to 71 percent between 2017 and 2021, driven by services like mobile money.

In addition, a renewed focus on leveraging innovation in the private sector such as those using digital technology to deliver financial products and services, or credit risk models for smallholder farmers has led to more for-profit businesses supporting the provision of relevant financial products and services for low-income people.

In the last eight years, the Mastercard Foundation Fund for Rural Prosperity has been working with 38 such businesses (referred to as Fund participants) and through their work, has reached over 5.3 million people in 15 Sub-Saharan countries in Africa, who now use innovative credit, savings and transaction-based products and services.

This has contributed towards the growth in the number of people actively participating in the continent’s financial system, and ultimately changing livelihoods.

The $50 million Challenge Fund focusing on financial inclusion was established in 2015 by the Mastercard Foundation and has supported businesses working across a wide range of sectors such as agriculture, renewable energy, finance, technology and logistics.

Debt sustainability is fundamental. It is the fabric that keeps economies intact.

In fact, history has taught us that if any country is to become a global superpower, military superiority alone will not get the job done. It requires economic capability to dominate the global stage.

Alas, that is why Africa has for the largest part of the developments been left out of the global decision making stage.

This did not happen by chance. Africa has found itself in a tight corner, where economic dependency immediately took over from colonialism.

After years of suffering under colonial masters, where all aspects of life were dictated by foreigners, the continent failed to fully emancipate itself and exert total autonomy.

This led to what later became known as neocolonialism. And today we find ourselves in peculiar circumstances where decisions for development are being made on our behalf under the disguise of cooperation.

It is for these reasons and more that we urge the Tanzanian government to exercise the utmost prudence when deliberating on applying for a loan from either commercial banks, international organizations, or foreign countries.

It is good to have ambitions for growth. Granted, building an entire economy does not come cheap. However, the cost of the ambitious plans should not outweigh the benefits; this is a basic principle.

As economic policy professor Stefan Dercon once said, “Africa should not embark on too many big, capital-intensive infrastructure projects simultaneously.” Doing so will strain resources and make the government resort to borrowing more in order to complete the projects.

With Tanzania’s national debt rising by close to Sh7 trillion in one year, the indicators, at least as shared by the government, are that the debt remains sustainable.

However, what should be of paramount importance is ensuring that the borrowing spree is not stretched too far as to overwhelm the national capacity when it comes to repaying what we owe.

With some suggesting that Tanzania is in fact on the brink of debt distress, it becomes even more prudent for the government to exercise caution when it comes to borrowing.

Indeed, concessional loans are more appealing than private sector commercial loans. They attract a paltry of the interest.

But, if left unchecked, these loans can also weigh down an economy due to the subtle nature of the interest rate and the long grace periods.

By

Leonard Wanyama

Whatever one’s political stand is in the August 9 general election, the issues should boil down to what prospective presidential candidates will present as a viable economic way forward.

At the heart of this are debates on what kind of tax policies should be put in place so that the country can become more productive and provide jobs that will uplift the society out of the current morass. Other than repaying the country’s international obligations, such as debts, taxes finance the delivery of public services and welfare programmes for the vulnerable, besides financing this year’s elections.

Three main questions, therefore, arise about Kenyan tax policy. First, how will one raise revenues and, by extension, broaden the tax base to have enough funds for the efficient running of government, not to mention repayment of debt obligations?

By

Lurit Yugusuk

Following the debt binge over the last couple of years, Kenya is set to spend KSh. 1.36 trillion towards debt repayment annually starting FY2022/23 going forward[1]. In light of this, debt repayments will consume approximately 65% of taxes. This signals that the country has a narrower fiscal space for balancing the budget and achieving equitable and sustainable economic development.

Nonetheless, it is notable that the Kenya government gives away or foregoes a lot of revenues that appears not to square out with its fiscal challenges. For instance, a 2021 Tax Expenditure Report published by the National Treasury highlights that Kenya has foregone on average Ksh383.9 billion worth of revenues between 2017 and 2020 to tax incentives. These revenue losses compare to equitable share revenues allocated to all counties in  FY2020/21[2]. Also, the report estimates that the country loses up to 6% of GDP through generous tax incentives. A 2017 publication by the IMF set the cost of tax incentives at KES 478 billion, a figure that accounts for 5.3% of the country’s GDP.

What then does this mean for fiscal justice in Kenya? At what cost is the government dishing out tax incentives for individuals and corporates established in Kenya? Is there room for better management and administration incentives/expenditures to ensure the economy reaps the most? Are tax expenditures as efficient as argued by the government?

By

Tom Odhiambo

Courtesy: https://www.oagkenya.go.ke/

If there is an institution in Kenya that actually plays its public watchdog role every year, then it is the Office of the Auditor-General. This is one of the few institutions in Kenya that releases what can be seen as objective and believable reports.

The Auditor-General’s office is an independent arm of the government, which is mandated by the constitution to evaluate how the government uses public resources.

This is what the Auditor-General says in the preamble to her 2019/2020 report about her office,

“The Auditor-General is mandated by the Constitution of Kenya, under Article 229, to audit and report on the use of public resources by all entities funded from public funds. These entities include; the National Government, County Governments, the Judiciary, Parliament, Statutory Bodies/State Corporations, Commissions, Independent Offices, Public Debt, Political Parties funded from public funds, other government agencies and any other entity funded from public funds. The mandate of the Auditor-General is further expounded by the Public Audit Act, 2015.”

The report further clarifies that constitutional mandate and its public significance by explaining why and when the report should be ready,

“The Constitution requires the Auditor-General to audit and submit the audit reports of the public entities to Parliament and the relevant County Assemblies by 31 December, every year. In carrying out the mandate, the Auditor-General, is also required by the Constitution under Article 229 (6) to assess and confirm whether the public entities have used the public resources entrusted to them lawfully and in an effective way.”

One may ask, but isn’t the report really about just evaluating whether public officers and institutions have used money allocated to them appropriately?

Yes, but the (in)correct use of public resources has wide constitutional implications. It affects the rule of law, democratic principles, and the sovereignty of the country, according to the Auditor-General.

Consequently, the Auditor-General is legally mandated by “… the Constitution, under Article 252, to conduct investigations, conciliations, mediations, and negotiations and to issue summons to witnesses for the purposes of investigations.”

In other words, the Auditor-General has the authority, on behalf of Kenyans, to demand that a state officer accounts for the money allocated to her or his office in a given financial year.

Which is why all Kenyans probably need to read the annual report by the Auditor-General. This report generally begins with an analysis of how the government projected its budget for the year under review and how it reported its expenditure for that year.

Thus, for tax paying citizens, this is the section where one gets to know – assuming one didn’t read the budget estimates – the amount of money the government had planned to spend and the percentage of it that it actually spent.

One of the surprises here, for instance, is that the government always falls short in its absorption of its planned expenditure. In other words, the government isn’t spending all the money it projected to spend in the financial year.

Indeed, the Auditor-General reports that the government has failed to absorb about 8.2% of its projected budget in the past 5 years.

Why would the government not spend money it had planned to? Would this mean that some development projects of social services were not delivered as planned?

Or did the government not have the correct data and information when planning the budget? Could this be one of the reasons why some government projects stall for years after they are initiated?

The Auditor-General’s report says this about the government not spending the money it should,

“Low absorption of the development budget will affect the rate of development and sustainability of services in the country while low absorption of the recurrent expenditure implies that citizens are denied requisite services which had been budgeted for. It may also imply that budgeting for expenditure may not be taking into consideration revenue collection or cashflows as informed by prior years.”

What this means for the public is that ordinary Kenyans need to participate in the budget making process but also be concerned about how the government spends public resources.

Why? Because, as the Auditor-General shows, often the government proposes projects without due consideration of the resources available for the implementation of the projects.

If one considers that even when the development projects are planned by the government, politicians claim to have influenced the initiative, then it is urgent that ordinary citizens be knowledgeable about such projects in their constituencies.

All projects have a cost implication – immediate or deferred. Indeed, the Auditor-General criticizes the government when she notes that “The projected expenditure seems to drive the revenue collection projections as opposed to actual revenue collections driving the projections of expenditures.”

In other words, the government often plans to spend money that it doesn’t have.

Consequently, it can’t deliver projects or services. Yet, when it finds itself in financial difficulties because of bad planning it sometimes increases taxes, which makes life difficult for the workers and the poor.

In some cases, because of poor planning, the government commits itself to a project, gets a contractor on site but abandons the works.

The contractor may end up suing to be paid the original quoted cost of the project despite not having completed it, citing the government not keeping part of its bargain.

Who pays for it? The taxpayer, and this is a double cost. First, the project is incomplete or may actually have to be demolished or will never be completed, for one reason or another.

Which is a loss of the already invested money but also a loss of the benefits to the would-have-been users.

Yet, secondly, it is still a significant financial loss should the government be compelled to pay the contractor (or funder) plus interest on the money invested so far. That is taxpayers’ money poured down the drain of financial incompetence and wastage.

And the Auditor-General flags such cases annually. For this reason alone, considering how there are so many such unfinished (white elephant) projects, all Kenyans need to read and discuss the Auditor-General’s report, all the way from the National Assembly to the County legislatures to the village baraza.

The writer teaches at the University of Nairobi. Tom.odhiambo@uonbi.ac.ke

By

Tom Odhiambo

Every year the government releases a national economic survey.

This document indicates the annual national economic performance. It shows which sectors of the economy had grown the previous year, and which ones had stagnated or declined.

It also estimates how the economy would look in the future, considering a range of local, regional, and global factors.

The Economic Survey is collated by the Kenya National Bureau of Statistics (KNBS).

The Survey looks at the various parts of the economy including Economic Performance; Employment, Earnings and Consumer Prices; Money, Banking and Finance; Public Finance; International Trade and Balance of Payments; Agriculture Sector Review; Environment and Natural Resources; Energy Sector; Manufacturing Sector Review; Construction Sector; Tourism Sector; Transport and Storage; Information and Communication Technology; Education and Training; Health and Vital Statistics; Governance, Peace and Security; Gender, Economic and Social Inclusion etc.

As incoherent as the report appears in some places (exactly what is ‘Health and Vital Statistics’?), it is one of the best statistical and narrative representations of the performance (real and projected) of the national economy in a period of one year.

This report allows the reader to peek into how the growth or decline of virtually every sector of the economy. For instance, if one wishes to know how many primary and secondary schools there are in Kenya, including their learner enrollment and the number of teachers in these schools, the Economic Survey provides these details.

If you are looking for data on access to health – how many people have a health institution near them and can actually get medical care, this report will give you a clue.

But one of the details in this report which every Kenyan should be interested in are the statistics on county income and expenditures. This section of the report, for instance for the 2021 Survey, is barely more than 3 pages.

Yet, these pages have the statistics on how much money the local government receives in a year from the central government, and how it spends the money. Indeed, the statistics for 2021 show that the distribution of funds to the counties is fair.

For example, the 8 billion shillings Garissa County is projected to get in the financial year 2020/2021 compares quite favourably with the 9 billion shillings that Kisumu County will receive. The 12 billion shillings for Nakuru County isn’t far from the 11 billion shillings that Narok County will receive.

Yet, an examination of how the counties spend the revenues shows that compensation for employees, made up of salaries, allowances and social contributions alone, is way higher than the other three significant expenditure categories: use of goods and services; acquisition of nonfinancial assets; and acquisition of financial assets.

There is no doubt that county governments are hardly investing in capital projects that would improve the quality of life of their citizens.

Too much money is being spent on utilities, printing, advertising, transportation, training, hospitality supplies etc. Less money is being put in building schools, hospitals, supporting local industries or building roads etc.

Which is why Kenyans need to read the annual Economic Survey. It is not every day that statistics such those found in the Economic Survey are found in the media. Actually, this Survey is hardly discussed in the public media.

There will be a few pages summarizing its contents when it is launched. Such summaries will look at, say, the state of the education, health, environment, and the energy sectors.

The reports will isolate what the media editors think are the key issues in the selected sector. But the reporters will hardly provoke a public debate on the issues raised.

In other words, beyond the immediate circles of specialists and (academic) researchers, this vital document on the state of the national economy hardly even reaches the target audience.

Even though it is freely available online, it is hardly cited in general discussion on the economy in the course of the year.

However, this is the document that should inform all the economic policy proposals by the politicians campaigning for right now. This is the document that those wishing to govern the country or lead the counties should be consulting.

For instance, for the governors of the counties, it will show them how much money they may be able to collect locally; how much money is projected to be transferred to their counties; how many citizens they will likely spend money on in a year; what development projects they should invest in etc.

The Survey will guide them as they make their local economic projections.

Considering that local governments don’t have their own functional bureaus of statistics, the Survey comes in handy.

Because it projects what the local economies are based on, what they are producing, how they are producing it, the value of the produce, the distribution of the production, the revenues earned from the produce, what these economies could produce in the future etc, the Survey is a quick reference tool for short term and long-term planning.

Thus, the local government, for instance, can plan how to best expand the tax net and grow its revenues.

The resultant growth in revenues should reflect in better quality of services and goods available to the locals, which in turn should increase productivity, and better quality of life.

It is not by chance that the 2021 Survey includes a section, ‘Gender, Economic and Social Inclusion.’

The section underlines the importance of spending more money on groups that have previously been excluded from mainstream economic activities such as women, the youth, people with disabilities, people from previously marginalized regions etc.

These individuals too pay taxes and are just as productive as the others who are favored by the traditional systems of resource distribution.

What the Survey shows is how the government of Kenya has attempted to address the economic disadvantages that have created inequalities in the country, including providing economic stimulus to specific groups, social protection schemes and gender-responsive budgeting.

But if the statistics that explain these key national and local micro- and macro-economic issues don’t get into the mainstream of national discourse, how will the country ever create an economically equitable society? The writer teaches at the University of Nairobi. Tom.odhiambo@uonbi.ac.ke

Courtesy: The Star Newspaper Kenya

By

Tom Odhiambo

I doubt that there is a country in the world where the receiver of revenue is a friend of the taxpayer. Not many individuals will willingly invite the taxman to take a share of their income or wealth.

Indeed, there are individuals and institutions all over the world whose only job is to help individuals evade paying tax partially or in total. Yet tax, like death, is a sure guest in every household in today’s economy.

Taxes come indirectly or directly; they are immediate or deferred; they hardly discriminate between the poor and the rich (even though the rich may actually pay less tax compared to the poor); they are all over, from the marketplace to school to church etc; and they are absolutely necessary in order for the economy to function.

Every taxman would be happy if all citizens paid their due taxes. If all citizens filed their tax returns, the Kenya Revenue Authority (KRA) would be happy. But that is the ideal situation. In the real world, not so many Kenyans file their tax returns.

In fact, most do not record what they earn in a fiscal year, mainly because they are in informal employment or work in small businesses with poor record keeping. But it may also be because of erratic earnings or simple disinterest.

Therefore, it is difficult for such individuals to respond to the call by the KRA for them to pay taxes. This situation can be found across many poor countries in the world.

In a case where the majority of the citizens don’t pay formal taxes on their income, it is the job of the taxman to convince them to do so. This is why KRA runs a campaign every year urging Kenyans to pay taxes.

The campaign seeks to convince Kenyans that their taxes pay for government services and public goods – roads, hospitals, schools, police services, markets etc. One can only imagine how KRA manages to persuade more Kenyans to register as taxpayers and duly pay their taxes.

But it was recently reported in the media that KRA would seek to know the sources of wealth of Kenyans who post photos of ‘their’ material possessions on social media.

Kenya’s chief taxman was reported by the Standard newspaper saying, “In the social media, we have some people posting some nice things. You would see some posting nice houses, cars, taking their families to nice places and so on. Here, we are not sleeping, when we see those, we see taxes.”

Well, KRA was suggesting that it was interested in the lifestyles that individuals led compared to the wealth they publicly declared to have or the tax they pay to the state.

So, what did it seek to do to address this situation? Spy on Kenyans online? Or summon them to explain their wealth and prove that they were tax compliant? How would they enforce such measures? Wasn’t KRA likely to end up chasing a wild goose? Does KRA even have the capacity to monitor such online activities?

There is no doubt that people who live beyond their known sources of income should explain how that is possible. Indeed, many individuals can afford to buy property and pay for services that the income they are known to earn would not support.

The so-called celebrities, who seem to have been the primary target of KRAs statement, do sometimes post on social media what they claim to be their material possession and photos of ostentatious consumption. But do they really live such a lifestyle? Can they afford the luxury goods that they pose next to?

It is not surprising that this announcement led to jokes, humor, and satire from Kenyans online.

Kenyans mocked KRA by creating comical skits of the KRA as the unseen eye, watching over any Kenyan who might wish to indulge in any luxury.

For instance, having a soda or a cup of coffee after a meal was depicted as likely to lead to KRA requesting for information one’s earnings that would allow him to drink soda or tea in these economically difficult times.

KRA was painted as nosy, intrusive, and idle.

Why would a government agency whose employees are among the best paid Kenyans wish to troll taxpayers online, chasing after individuals who post images of themselves next to expensive cars (not necessarily theirs), drinking seemingly expensive whisky (most likely contraband), and wearing bling bling (definitely fake)?

Kenyan celebrities would probably be the worst example to use when seeking to audit the lifestyles of individuals who seem to live beyond their means. Most of them are merely ‘showing off’ other people’s cars, houses, or even clothes and jewelry.

Thus, Kenyans weren’t necessarily outraged that KRA wished to check on their tax compliance by doing a lifestyle audit.

Many Kenyans felt humored. They found it incredibly funny that instead of the taxman finding better ways of encouraging or enforcing tax compliance, they would issue what seemed like threats.

Not so many rich people actually flaunt their wealth online. Tax cheats or evaders would not necessarily show off what they possess and how they spend their money. They would most likely not post public photos of themselves on expensive yachts or helicopters; or on expensive beach hotels; or wearing diamond or gold rings.

KRA’s announcement is a case of doing the right thing the wrong way. The number of Kenyans on social media is actually small compared to the whole population. The number of ‘rich’ Kenyans who often show off their wealth in public is quite negligible.

Was this not a missed opportunity by KRA to get Kenyans to debate more on the need for rich Kenyans to pay more taxes?

Couldn’t KRA have used this chance to start a public debate on social media about more effective ways of paying tax for Kenyans who are not in formal employment but who still make good money without paying tax; and also, how Kenyans could track the use of their taxes by the government online?

The writer teaches at the University of Nairobi. Tom.odhiambo@uonbi.ac.ke

By

Tom Odhiambo

Title: Imposing Standards: The North-South Dimension Global Tax Politics; Authors: Martin Hearson; Publisher: Cornell University Press; Year: 2021; Pages: 247.

Electronic Access: Free Download, Use the free Adobe Acrobat Reader to view this PDF file.

In today’s globalizing world, it is near impossible for any country not to have some kind of business with some other country. The countries of the Global South are more or less forced into relationships with countries of the Global North because of the flow of money for investment down south.

International foreign direct investments (FDI) are touted as one root out of the poverty trap that is strangulating the Global South.

Thus, government officials from poor African, Asian, and Latin American countries travel the world or hand out brochures at conferences, promising multinational corporations and individual investors of benefits should they set up shop in their countries.

Bilateral tax treaties, therefore, are written because the investing country desires to protect the economic rights or benefits of their citizens in the global south countries.

The states receiving the investments are, on the other hand, convinced that they are taking care of their benefits. They tend to believe that by signing these treaties, they are entering into a special and exclusive relationship with the other country.

As Martin Hearson shows in his book, Imposing Standards: The North-South Dimension to Global Tax Politics (Cornell University Press, 2021) thousands of such treaties have been signed. Some of these treaties are decades old but still determine how cross-border investments and taxation are treated between the signatory countries.

There is enough literature to show that in the cases of the signed treaties between countries from the Organization for Economic Cooperation and Development (OECD) and those from the global south, the latter hardly gain much.

The poorer countries of the global south may get some multinational to invest locally, but they have little leverage over the transfer of earnings back to the investor’s country of origin. The treaties are largely designed to avoid double taxation.

This means that there is a lot of concessions granted to the companies from the rich countries by the governments of the poor countries. Why?

Of course, government officials who negotiate these treaties are under pressure to attract investment. They know that they are competing with other countries for the same investment. They may even have an idea of what the other countries are offering the investor.

But they also know that the investors and those negotiating on their behalf are prepared to extract the most beneficial terms to them.

So, the government reps sit at the negotiating table probably knowing that the other side of the table is better prepared, and because it has the money that the government needs, it won’t accept unfavorable conditions.

Actually, Hearson shows in Imposing Standards that often the government negotiators are poorly skilled, unprepared or just don’t have the technical skills needed for high level negotiations. Why would this be so?

In some cases, this situation happened or happens because of the nature of government employment where patronage could have led to staffing of important offices with less skilled but connected individuals.

Also, bilateral trade agreements can involve lengthy discussions on several clauses of the treaty. Unless those representing a given government are experts in treaties, especially in relation to taxes and taxation, the government will likely end up being shortchanged.

But even more important is the fact that the negotiators from the OECD countries would most likely be highly qualified, better remunerated and some of them seasoned in the business. The terms of engagement between the two groups could also have been predetermined by history plus theory and practice from the Global North.

How does some poorly paid, inadequately trained, and unmotivated civil servant negotiate with such a team, under such conditions?

As Hearson shows in the case of Zambia, such circumstances once led to:

In other words, without better qualified, knowledgeable, and motivated negotiators, African countries will continue to lose out when it comes to signing bilateral tax treaties.

Imposing Standards reminds everyone who is concerned about the nature and methodology of bilateral tax treaties that they are historically and innately skewed against poor countries of the Global South, especially African ones.

It is not just that Africa is undeveloped, has lesser qualified negotiators and is more subject to political changes that affect such treaties, it is also that in many cases, the investing companies pay expatriate workers better than the locals.

This arrangement means that they do transfer more resources back to their home countries more easily because of reduced tax rates. African countries have very little leeway to renegotiate or repudiate these treaties because, in the first place, they signed them voluntarily.

Recourse to a court of law in case of a dispute or to a private arbitration is often expensive and paints the poor country in bad light. Such a country would be seen as unreliable and a risk for investors.

Considering the power of the OECD countries, for instance, it is easy for an African nation, for instance, to become an investment pariah. No country wishes to be described as such.

There is no doubt that bilateral tax treaties will continue to disfavor countries of the Global South. The wealthier nations of the Global North will continue to naturally take care of their interests, and thus, ‘impose standards’ on others.

But the poor countries need to train their negotiators, pay them well, establish institutions that will train local manpower in tax law and negotiation skills.

Yet, probably the most important skills would be to imbue their citizens and officers with patriotism, so that they don’t just concede to unfavorable terms by investors because they don’t seem to care or have been promised some other benefits but refuse to accept standards designed elsewhere being imposed on their countries.  

The writer teaches at the University of Nairobi. Tom.odhiambo@uonbi.ac.ke

BY

Tom Odhiambo

The government of Kenya (GoK) seems very determined to plug the debt hole that it has dug itself into in the recent past. Balancing its budget seems to be so taxing that it has decided it might as well tax Kenyans out of water and off the fire, in a manner of speaking.

The government is convinced that since Kenyans have to drink water – or bathe and cook with it – and since they must eat – and so cook their food – it shall seek to share with them the money they use for buying water and energy for cooking.

GoK has been entertaining proposals to levy more taxes on water but has gone ahead to simply overtax cooking gas.  

Indeed, those who cite tax as one of the certainties of life make a very important point. But it seems as if the Kenyan taxpayer has to literally pay for every little item they use in life. Undoubtedly water and gas or paraffin are essential commodities in millions of households in this country.

This makes them a sure source of tax income for the taxman – it is near impossible to avoid using water at all and in one way or another, a modern household will have to cook, using paraffin or cooking gas. In fact, kerosene is also used for lighting by millions of Kenyans who can’t afford electricity or solar power or any other means of lighting their homes.

Well, the government may claim that it needs more money in order to deliver potable water or to get electricity connected to Kenyans. But does it have to impose more taxes on water and paraffin, for instance, whilst lowering taxes on, say, solar power products?

No. it doesn’t. Isn’t water basic to human survival? It is used in nearly all every manufacturing process. The claim that water is life needs no proof. Water scarcity is now a source of serious human conflicts all over the world.

East Africans need not look farther than the dispute between Ethiopia and Egypt over the Great Ethiopian Renaissance Dam (GERD) in Ethiopia, which the Egyptians claim will affect the lives of millions of its citizens.

Thus, it does not matter the socio-economic class of a Kenyan, she or he needs water, in abundance, every day. But what is hardly reported in the media is that poor Kenyans pay more for water than those who are well-off.

They just don’t pay more in the real cost, thus more taxation; they may pay more in terms of the cost to their life of using unsafe water.

How? Because potable water is expensive, they may resort to use cheaper water whose source they may not know – could be untreated borehole water or water from polluted rivers. This double jeopardy is directly related to the impact that extra taxation on water has on its costing, sourcing, distribution and use.

But probably what is more important for the ordinary and often economically struggling citizens is the fact that lack of water is a life and death situation for a majority of them. Little or no water could lead to drought, poor crop harvests, starvation, and death.

Taxing water increases the cost of producing and distributing food, which negatively impacts the livelihoods of millions of rural and urban poor.

Yet, the government has sworn to protect the basic rights of its citizens. Water is, therefore, an important human rights issue.

Why would any government wish to ignore a basic right that the United Nations General Assembly acknowledged in its Resolution 64/292, which noted the significance of water and sanitation in realizing all the other human rights?

Without clean drinking water, which can also be used for cooking, bathing, washing and such other human needs, we cannot even begin to talk about any other human right.

As for the imposition of more taxes on paraffin and cooking gas, the government, again, ignored the fact that it was taxing many Kenyans who are struggling to make ends meet.

Cooking gas is primarily less a polluter than firewood or charcoal. It is also used by thousands of middle or aspiring middle class Kenyans. These working Kenyans economically support millions of poorer fellow citizens, relatives, friends, and colleagues.

Taking more money out of their pockets harms those who depend on them. It also pushes them to consider using alternative sources of energy – in this case charcoal and firewood become the immediate substitutes.

How can a government that has declared its intention to go ‘green’ tax more a product that is integral to its green economy agenda? Shouldn’t the government of Kenya be subsidizing the delivery and use of cooking gas?

Shouldn’t the government be encouraging home builders to set up cooking gas storage facilities in new housing blocks as well as distribute it to all units within the block?

Considering that the cost of cooking using electricity is still prohibitive in this country, shouldn’t the government relax taxes and taxation of the clean cooking gas?

The tragedy of having extra taxes on paraffin is that it has a direct impact on the quality of life of millions of Kenyans who use it for cooking and lighting. Millions of households light their homes using kerosene. Such families have no money to buy candles or solar energy products or gas for lighting.

These families count among most poorer Kenyans, mostly living in the countryside and in the underprivileged neighborhoods of their urban centers. For such families, they can only resort to using firewood for lighting when they can’t afford kerosene or gas.

What to do? All Kenyans, but especially the civil society, should push for the government of Kenya to acknowledge that water is a basic human right, which impacts the enjoyment of all other rights. Water should be free, especially where the citizens are too poor and don’t use much of it.

Or at the least, if it must be taxed, such tax should be negligible and mostly meant to be used to maintain the facilities that ensure the water is collected, treated, and distributed to its users.

As for cooking gas, the government needs to exploit the potential opportunities for getting local cooking gas, packaging, and distributing it to buyers. Also, concerned parties should look for a resolution that is sensible to all of us, The writer teaches at the university of Nairobi. Tom.odhiambo@uonbi.ac.ke

(PHOTO CREDITS: YouTube-@Terrence Creative)

By

Tom Odhiambo

The world is one big Pandora’s box. There are just too many secrets in the world, especially around money and wealth such that even the Pandora Papers have barely scratched the surface of illegally acquired wealth by politicians or individuals connected to governments.

On their website, the International Consortium of Investigative Journalists (ICIJ) claims the following about its findings summarized in the Pandora Papers:

“The most expansive leak of tax haven files in history reveals the secret offshore holdings of more than 300 politicians and public officials from more than 90 countries and territories in the Pandora Papers. The trove of more than 11.9 million confidential files shows how presidents, prime ministers, royals, elected officials — and some of their family members and closest associates — stash assets in a covert financial system with the help of firms who establish companies in secrecy jurisdictions. Explore the biggest political names uncovered in the data (the emphasis is theirs).”

ICIJ goes on to state that “The Pandora Papers reveal how 35 current and former world leaders and other powerful political figures, as well as their closest associates and immediate family members, use secrecy jurisdictions around the world.”

Considering the hype that the Pandora Papers received in the media one would have imagined that they would reveal secrets about the ‘money matters’ of more than the 300 plus politicians, their families and associates that they discuss. In other words, the Pandora Papers are a bit underwhelming.

For there are just too many individuals all over the world who have illegitimately made their money – one of the ways being avoiding to pay due taxes – and who have stashed it abroad.

In fact, there are so many ways of laundering proceedings of illegal money that one doesn’t really even need to hire expensive lawyers to hide the owner’s name and those of his or her beneficiaries behind tens of front companies.

Many Kenyans – and Africana, especially West Africans – know about ‘wash wash’ guys. These are definitely con artists, as illustrated in a recent Kenyan comedy Terence Creatives’ “Tunatumia Kemikal” but they are also money launderers.

They promise innocent Kenyans that they will ‘wash’ your money and make it multiply. If you give them 1 million legitimate shillings, they will double it. Of course, in public debates about ‘wash wash’ the victims are laughed at.

They are seen as gullible, as greedy and losers – yet they are also dreaming of making it in life like the recently poor politicians or civil servants who are now stinking rich. Sure enough, they lose a lot of money in these get-rich-quick schemes.

Yet these con artists’ schemes serve other hidden and often darker systems. They more or less provide a near legitimate conduit for ‘washing’ dirty money by tax avoiders back into the system.

It works in a seemingly complex way, but it really isn’t. The ‘wash wash’ guys con some naïve Kenyans of their legitimate earnings. The scammers have a thick protective layer which means that however daring they are, they are unlikely to be arrested and charged in a court of law.

Only a few foolish ones of the fraudsters – those who aren’t willing to share the cake broadly – end up in court.

The more successful ones then lead a ‘flashy’ life of driving expensive flashy cars; wearing designer attire; gregariously eating; drinking in expensive restaurants; sloshing around in pubs; and living in exclusive neighborhoods.

By their lifestyle they establish a network of followers – pretentiously rich, newly rich, and old money. They naturally become ‘influencers’, ‘foreign investors’, ‘budding entrepreneurs’, ‘successful businessman or woman’ and so forth.

And just like that, the scammers set up high end pubs, restaurants, casinos, barber shops, boutiques, and car yards etc. They would naturally have local co-shareholders.

What started off as a scam becomes the source of initial capital for very glamorous looking businesses. Remember that these individuals didn’t pay a cent in taxes after robbing some poor individual of their money by pretending to either double it or make a quick profit for them.

Now that their ‘legitimate’ business has other investors, they will most likely declare loses every other year in order to avoid taxes. In the end, they will receive offers from a foreign investment group. Which is where the Pandora Papers come in.

The foreign investor is most likely a local big man who had stashed his loot in some foreign company. The politician, civil servant or businessman connected or related to government officers, will bring back to the country the illegally acquired wealth in the name of investing in a local company.

She or he may not even be a director of the company that is investing locally. Her or his proxy will earn the dividends from the investment and probably reinvest it locally or send it back abroad. There is a high chance that such an individual will make efforts to avoid paying taxes.

And the cycle continues.

Therefore, what often appears as some simple scam, which the local media advises locals to avoid, ends up as a source of illicit wealth, which is then used to probably create shell corporations that perpetuate the original scheme of tax avoidance.

It may not make sense in the beginning, but a closer look will reveal that for individuals who haven’t made enough money from tax avoidance or evasion or stealing or exploiting their offices to seek bribes, ‘wash wash’ can easily be a conduit to ‘reinvest’ locally and establish a legit business, which may fully, partially, or not pay taxes.

The point that needs to be emphasized is that the initial capital came from illegitimate sources. Shouldn’t such an individual forfeit the entire wealth acquired so far?

Pandora Papers claim to have unearthed the shady dealings of significant public figures and their relatives and associates.

Someone may ask, so what? These are powerful men and women. They can damp down the reporting of the Pandora Papers in their countries. They can control the public debate about the whole report or parts that touch on them.

Indeed, one of them is reported telling the ICIJ when asked to comment, “I don’t know what you are talking about, and I can’t make any reply.”

One imagines that this particular individual isn’t just playing safe; he is also performing his powers as someone who knows that such a report won’t affect his public image or lead to prosecution or damage his moral standing.

He knows that there are enough and more damaging ‘wash wash’ scams in his own society for him to worry about reports of expensive lawyers, shell companies and bank accounts in Switzerland or wherever.

The writer teaches at the University of Nairobi. Tom.odhiambo@uonbi.ac.ke