Sustainability is a major theme across the world. This has been driven by climate change which has had devastating effects on some parts of the world.

The negative effects have had a disproportionate impact on developing countries due to their limited ability to mitigate the impact of climate change.

Climate change has been touted by some scientists as a potentially existential threat to the human population.

The world has come together through the UN to ensure coherence in the global fight against climate change.

The United Nations Framework Convention on Climate Change has been organising annual events that bring together Heads of State, ministers, negotiators, climate activists, civil society representatives and private sector players.

Africa hosted COP 27 with a focus on delivering action on several issues that are critical to tackling climate change.

By Tax Justice Network Africa (TJNA), the East African Tax and Governance Network (EATGN), and Africa Centre for People, Institutions and Society

What are tax expenditures?

When a government wishes to financially support a vulnerable sector or community, it does so in various ways.

For example, to address period poverty in Kenya by improving girls’ access to sanitary pads, the government could decide to provide free or subsidised sanitary pads to schools by allocating funds to the relevant ministries for their provision. This would be reported as a direct expenditure.

Alternatively, the government could exempt pads from value-added tax (VAT) to reduce their cost. In doing so, the government would be foregoing the tax that girls would have paid when purchasing sanitary pads. This is also an expenditure by the government, but more specifically, a tax expenditure.

Tax expenditures are the revenues foregone by a government through tax exemptions, incentives, deferrals, or allowances. Essentially, any deviation from what the actual tax rate should be, is a tax waiver. 

Magnitude of illicit financial flows in Western Africa.

By Michael Tantoh

Civil society actors, journalists, academics, lawyers and other African actors are advocating for African initiatives to fight against illicit financial flows

A public round table was organised by TrustAfrica in Dakar, Senegal on June 24 under the theme –  “The latest developments in illicit financial flows and the role of African media”. Participants said that recent crises have shown how critical it is to mobilise internal resources to deal with pandemics and current challenges for the continent’s development. To this end, the fight against illicit financial flows (IFFs) is now more than ever, a matter of absolute urgency.

Pan-African think tank TrustAfrica estimates that losses suffered by the continent amount to about U.S.$88.3 billion per year and represents 3.7% of gross domestic product (GDP), money which could be channeled towards the transition to a post-Covid-19 Africa and structural transformation and development. This is happening because of insufficient legal and institutional frameworks coupled with a lack of specific texts dedicated to the fight against these illicit flows.

John Kaninda, a lawyer at the Kinshasa bar, specialising in mining and energy laws and taxation said that Africa wouldn’t need international aid if this capital flight was stopped. While Dr. Malado Agne, a teacher and researcher at Cheikh Anta Diop University, criticised the fact that at the international level, IFFs are analysed from the perspective of sustainable development. What irritates the most, the solutions are known and recognised, but great difficulty lies in its application because of resistance from players who are involved in the industry, especially since 65% of illicit financial flows come from mining activity, Agne said.

By Zephania Ubwani and Gadiosa Lamtey

National debts are overwhelming the economies of the East African Community (EAC) member countries even as they are yet to recover fully from the impacts of Covid-19 pandemic.

While Kenya is planning to enact a law on debt ceiling, Tanzania intends to borrow a whopping $2.34 billion to finance the $18.1 billion budget for 2022/23. National debts, which is money owed to the country by domestic and foreign lenders, now account for a significant portion of the gross domestic product (GDP) of the six EAC countries.

Kenya has the highest ratio of national debt to its GDP, estimated to be 64.2 percent in September 2021 compared to Tanzania’s present value of public debt to GDP which was at 31.0 percent in April 2022, less than a threshold of 55.0 percent. This is as the government (Tanzania) plans to borrow at least $2.34 billion from foreign financiers to finance its budget for the coming financial year. According to Finance and Planning minister Mwigulu Nchemba, the national debt has reached Sh69.44 trillion this April from Sh60.72 trillion in 2021.

He told Parliament in Dodoma last week that the government borrowed Sh8.7 trillion in the past year which is equivalent to 14.4 percent increase. The increase in national debt is largely attributed to the receipt of soft loans for financing development projects and release of special bonds worth Sh2.18 trillion for the funding of the Public Service Social Security Fund (PSSSF).

Although rising national debt has been a matter of concern, the Tanzania government maintains that it was still “sustainable in the short, medium and long run based on the international measures”.

National debts are there because governments the world over do borrow because of inadequacy of revenue from their own sources like tax to finance public goods and services.

Inflation is a process of sustained increases in the general price level over a period of time, typically 12 months.

Inflation can be calculated for a country, for specific regions in a country and for different income and demographic groups, for instance, pensioners.

These different calculations are important because the spending patterns of regions and groups differ. That means that their rates of inflation also differ. It is therefore important for each household to have a clear understanding of its own inflation rate.

A number of countries allow for the development of this improved understanding. For example, South African households can use an Internet tool such as the personal inflation calculator of Statistics SA. A personal inflation calculator, based on the spending patterns of households, is also available for the Euro

The phrase describing inflation as ‘enemy number one’ is borrowed from the research done by South African businessman Dr Anton Rupert on the worldwide inflation problem suffered in the 1970s.

He described inflation this way due to its distortive impact on the economies of countries and the wealth and financial well-being of households.

By Tim Hirschel-Burns

Tax simplification would level the playing field between tax authorities and multinationals by relying on easily verifiable standards.

With one of highest rates of poverty in the world, Sierra Leone may wish it could magically acquire a source of wealth to relieve its struggles. Yet, it already has one: it is one of the world’s largest producers of diamonds and other minerals.

The problem is that much of the benefits end up in tax havens. For example, leaked documents revealed that one of the country’s largest diamond mines undervalued sales to its subsidiaries in tax havens by as much as 35%, illicitly reducing revenue that Sierra Leone could have used for schools, hospitals, and roads. In total, the estimated amount of revenue Sierra Leone loses to tax abuse is nearly 1.5 times its entire health budget.

Many African countries are in a similar position: resource-rich and money-poor. The conventional wisdom is that they should fight corporate tax avoidance by performing their best imitation of tax systems in the Global North. But this fight takes place on a profoundly unequal playing field. On one side, there are typically under-resourced and undertrained national tax authorities. On the other, there are multinational companies employing teams of top lawyers and accountants. Moreover, rich countries suffer significant losses to corporate tax avoidance too.

Fortunately, there is a better alternative: tax simplification. As I argue in a recent paper in the Yale Journal of International Law, African governments can fight tax avoidance and level the playing field between their tax authorities and multinational corporations by adopting rules that reduce administrative burdens and rely on easily verifiable standards.

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 Evans Ongwae

Most Kenyans believe that the government rarely meets its revenue collection targets mainly due to tax avoidance and evasion.

While tax evasion is any illegal step to avoid paying levies due to the government, such as not declaring income to revenue authorities; tax avoidance is the legal means of out-manoeuvring the tax regime by finding ways to pay the lowest rate of tax or none at all.

The abuse of existing tax loopholes through the combination of avoidance and evasion, makes Kenyans believe that this is one of the main reasons forcing the Government to borrow externally to bridge budget deficits.

A majority of the people surveyed across the country in June 2021 by the East African Tax and Governance Network (EATGN), said this was a key reason for why government does not achieve its tax collection targets.

About 31 percent of Kenyans perceive tax avoidance and evasion to be more problematic in achieving annual revenue targets than corruption or theft at 26 percent; poor economic growth at 20 percent; unrealistically high Kenya Revenue Authority (KRA) targets at 14 percent; and the burden from Kenya’s debt repayments at two percent.

Reacting to the findings of the study, titled, Revenue Collection and Economic Justice: Kenya National Tax Outlook Survey – 2021, Oxfam’s Riva Jalipa says people with means are exploiting legal loopholes to avoid paying their fair share of taxes. “They use accountants and lawyers to pay as little tax as possible, or none at all,” says the tax justice strategist.

PHOTO CREDITS: The East African

By

Luke Anami

Tanzania attracted more citizens of other partner states to live and work within its borders in the past years, a new scorecard on the Common Market shows. The country issued 19,629 residents permits compared with Kenya’s 2,378, Uganda’s eight and Burundi’s 459.

The report shows that Kenya and Tanzania issued the highest number of work permits to other EAC citizens between January 2019 and December 2020. Kenya issued 2,378 work permits to mostly Tanzanian and Ugandan nationals, while Tanzania issued 1,664 work permits mostly to Kenyans and Ugandans.

Kenya, Tanzania and Burundi attracted the highest number of students from other partner states between 2019 and 2020.

The Common Market Protocols (CMP) scorecard covering the period between January 2019 to December 2020 was prepared by the “31st meeting of the Sectoral Council of ministers responsible for EAC Affairs and Planning,” who met in Arusha from June 7-11 and attended by Secretary-General Peter Mathuki and all EAC Affairs ministers except Uganda’s.

PHOTO CREDITS: Citizen Digital

By

Everlyn Muendo and Leonard Wanyama

Considering the ongoing effects of COVID-19 pandemic, this year’s Finance Bill 2021 for the budget of FY2021/22 is undergoing a great deal of scrutiny.

This is because the public is keen to know how these proposals will affect the common citizen, Wanjiku, as well as the budget’s impact on small businesses. The Finance Bill 2021 has introduced several progressive tax measures that are in line with international standards.

These measures aim to reduce the tax avoidance activities of multinational companies which have been estimated to cost Kenya USD565.8 million as reported in the recent Tax Justice Network (TJN) study on the State of Tax Justice.

Significantly, these tax measures include the introduction of a new definition of permanent establishments, that is, rules determining creation of a fixed place of business for foreign companies.