By

Tom Odhiambo

Title: Taxation and Gender Equity: A Comparative Analysis of Direct and Indirect Taxes in Developing and Developed Countries; Editor(s): Caren Grown and Imraan Valodia; Publisher(s): Routledge, IDRC 2010-06-10; Pages: 352; Language: English

The editors of the book Taxation and Gender Equity are quite explicit from the beginning about why they bothered to study the gendered nature of tax and taxation but also why it is important to consider the question of how women and men pay tax.

In the introduction, they write, “Drawing on a three-year eight-country study Taxation and Gender Equity outlines why gender equity advocates need to interrogate the revenue side of public finances, and why tax analysts and policymakers should carefully consider the gender impacts of tax policies and tax reforms.’

In other words, although a rarely discussed subject, evidence has tended to show that women and men pay tax differently. And this is a worthy subject to consider when dealing with the question of revenue collection and taxation, especially in Africa.

But why should we be bothered about the differences between the tax burden of women compared to that of men?

After all, every human being pays some tax at one time or another. More accurately, why would anyone wish to read the book Taxation and Gender Equity: A Comparative Analysis of Direct and Indirect Taxes in Developing and Developed Countries (Routledge, 2010) edited by Caren Grown and Imran Valodia?

Because how, when and where women and men pay tax often differs carrying with it hidden gender bias in the taxation of women compared to men.

In the first chapter of the book, the author notes that among key factors to consider in the study of gender and taxation, and which informs research in Taxation and Gender Equity, include what has been described as “‘stylized facts’ about gender differences in economic activity that should be used to understand the impact of taxation on men and women.

They note that these facts are: “gender differences in paid employment – including formal/informal employment, wages and occupational segregation; women’s work in the unpaid care economy; gender differences in consumption expenditure; and gender differences in property rights and asset ownership.”

Taxation and Gender Equity seeks to provoke a nuanced debate on how gender differences; employment or lack of it; (unfair) or different pay structures; general distribution of income; household expenditures; taxation models, among other factors, affect women compared to men when it comes to paying tax.

If one cuts out the jargon and its seeming academic tone, this book should be a general reader among advocates of gender equity and tax justice, policymakers, politicians, bureaucrats, tax experts, or even the public.

For the questions it poses tend to appear on the margins of public debate on earnings/income and taxation.

Yet these questions are quite urgent. For instance, how should a family that depends on a single earner of income be taxed?

Here it may be worth considering that the gender of the family head and of that single breadwinner matters – men may most likely find regular pay for work; women may only manage to work for irregular pay as social demands of caregiving may not allow them to work longer and regularly.

How much tax does such a family pay considering that it may have a higher household expenditure, especially if there are many children and other dependants? Here, considering the age of the children as a factor in consumption; and the fact that some of the children may not add much to the unpaid household labour.

What could be the differences in the tax paid if we compare the tax as paid by a household headed by a man to that headed by a woman?

Taxation and Gender Equity offers quite interesting propositions in discussing the implication of gender differences for income generation, the primary tax burden for the individual, the explicit tax paid and the hidden taxes etc.

Take the question of work – finding employment; the type of work; the compensation; the tax paid on the compensation; the explicit and implicit biases in personal income tax burden etc.

What are the differences in the experiences of women and men when they look for work? Do women face similar obstacles to finding work as men? What do the differences in the compensation for women and men imply for their tax obligations?

The answers to these questions seem obvious but they are complicated, depending on the society one is studying or the culture one is investigating or the work in question.

Women are generally disadvantaged when it comes to finding work. They are generally less skilled and least qualified because of lack of or poor access to education. They are likely to be the caregivers at home. They may be forced by marriage or childbearing to give up work and depend on men, or relatives, or charity, or the government.

All these facts have implications for the personal income tax that a woman pays compared to a man. Staying at home means one significantly reduces their chance of finding work or networking with those who could connect them to work opportunities. Yet the individual will still pay taxes when they have to pay for goods and services that are taxed.

But even when work is available, women are likely to receive less compensation than men. This is a historical, cultural and almost ‘normalized’ practice the world over. It doesn’t matter whether one is considering developed or developing economies.

Research shows that women will somehow be paid less and are likely to spend more at home and on themselves compared to men. Food, clothes, medical care, schooling, among other needs for children or the household are the concerns of women.

This situation implies that even employed women who are paid well but who have children and dependants at home will suffer more taxation on their income than their male counterparts.

Or, think of the rural-urban divide, which has major economic implications for women compared to men. In most African countries, women still stay at home (in the village) whilst men travel to look for work (towns and cities).

Although the men may be taxed directly and indirectly on income earned, whatever money they send home to their wives (and mothers) is subject to a series of taxes. They may be taxed by the money transfer service provider – on behalf of the tax authority; they will be taxed on goods they buy –VAT; and they may end up paying for several other local taxes.

Yet, even if the woman in the village works on the farm and is able to earn some income, the land and any revenue generated thereof may still be registered in the name of the man. Such a situation is worsened in cases where the marriage isn’t ‘official’.

In other words, the woman may create wealth, for which she will be taxed, but the wealth will benefit the man, who has the official authority to transact in it or even transfer it.  

To speak about the implications of gender differences on revenue and taxation, and the biases – obvious and hidden – that often saddle women with a higher tax burden compared to men, is to suggest a more careful relook at policy and laws that determine tax collection.

Gender equality is not just a matter of politics and of adding up numbers. It is a question of constant revisiting of the processes by which we make laws, asking all the time if the laws are sensitive to gender differences, and creating awareness in all institutions on how to address the likely deficits in the legislation and policies dealing with taxation, especially where women are concerned.

This, in the end, is the moral argument of Taxation and Gender Equity.

The writer teaches literature at the University of Nairobi. He writes on tax because he pays tax. He can be contacted at tom.odhiambo@uonbi.ac.ke or +254720009155

By

Tom Odhiambo

Title: Taxing Colonial Africa – The Political Economy of British Imperialism; Author: Leigh A. Gardner; Hardcover, 271 pages; Publisher: OUP Oxford, 2 December 2012; Language: English

Most of modern Africa, with the exception of bits of the continent, is largely a colonial creation. And by this we do not mean the geographic boundaries and the political systems only. We also mean the structures that define the lives of Africans today, from culture, to social conduct, religious beliefs, politics to economics etc.

Today’s African, even when she claims to not follow the European, Asian or Arabic religion; or when he proclaims his ‘Africanness’ for everyone to hear (mostly in a European language); or when they conduct their lives in what has become commonly known as the ‘African traditional’ way, are still products of European thought and practice.

Thus, although we speak today of a globally connected Africa, an Africa that aspires to develop on its own, many commentators still argue that African progress won’t happen until Africans decolonize their minds and ways of life.

But is this possible, or even a worthy effort? Can Africa set itself free from its colonial heritage? Is it even possible to think of Nigerians, Ghanaians or Kenyans not behaving in some kind of ‘British’ manner?

Can the Congolese, Ivorians or Algerians fully exorcise the ghosts of their French connection? Much of Francophone Africa still designates its currency in the shadow or image of the French franc despite France itself using the Euro.

Africa will always be a child of its colonial ancestry. Which is why even in tax matters, there are still lessons to be learnt from the colonial enterprise, considering that economic historians have always argued that the British Empire was first a business and only later a state.

The settler economies were really private business entities, which only later needed an organized state structure to protect them against competition from business by the other races in the specific country, or from likely external aggression.

Thus, in Kenya – and other colonies – non-Europeans couldn’t farm specific crops or trade in certain goods or render particular services.

However, a modern state needs money all the time to survive. Bureaucracies tend to consume without producing much. Taxes keep most states going, especially if they have nowhere to borrow from.

Colonial states had to find ways of economic survival beyond what their mother country could give them. Therefore one may argue that by understanding the tax models of the colonial state, we might gain better insights into the operations of the (postcolonial) modern state.

This is why a book such as Taxing Colonial Africa: The Political Economy of British Imperialism by Leigh Gardner (Oxford, 2010) is worth reading today. The book is based on colonial taxation records in Kenya and Zambia. 

Gardner digs into an incredible amount of colonial data to show how the British colonies of Kenya and Northern Rhodesia (Zambia) raised revenue/taxes; how the collected taxes were used; where they were spent; what were the economic and political implications of the tax policies; who collected the taxes; who decided where they were spent; what were the implications for the colonies as they progressed to independence, among other considerations.

The broader question here is: what can we learn from this taxation history today?

Taxing Colonial Africa makes a compelling case about the ‘burden of the Empire.’ What really was the cost of running the colonies? Who bore that cost? Where would the colonial government have raised revenue from if there weren’t any significant exports?

Were there direct material benefits for the British government? Who gained from the colonial enterprise in the end? The British or the independent states?

Gardner shows, in various ways that the answers to these questions are difficult to come by, mainly because few people have bothered to study how the colonial system was financed.

But Gardner argues that there is no doubt that that much of the money needed to pay for goods and services to oil the colonial administrative machinery had to come from the native populations.

The poll or hut tax was a major form of raising money in the colonies as it was easy to collect.

But revenue could also be extracted from taxing trade – exports and imports, where such happened; the government could also raise taxes from minerals and other local resources such as cash crops; it could levy local excise duties; it could raise fines, say from the courts; it often could earn or impose fees from services it rendered; or road and transport toll.

However, the colonial administration was generally expensive because the salaries of the administrators was set in London, according to Gardner. Yet they had to be paid from local resources.

Consequently, the local administrators had to find means to enforce revenue collection to guarantee the running of government services. Gardner argues that the colonial administrators would often find a way of working with the local elites in order to ensure less resistance to their rule as well as to their tax policies and practices.

Indirect rule was one of the ways of ensuring that the local chiefs and councils of elders were complicit in the taxing of Africans for the benefit of the colonial administration.

Yet the colonial administration struggled to balance its books from local taxes. The poor revenues in the colonies could account for the poor public expenditure. In other words, the government could not commit itself to spending money on schools, hospitals, roads etc, when it actually didn’t have the money.

This scenario explains why most newly independent African countries weren’t really worth anything much, economically. They had no educated and skilled people to take over from the departing administrators and professionals.

They didn’t have adequate roads and transport services, making intra-country administration and governance difficult. In some places medical services were missing and have hardly been established up to today.

These countries were also saddled with the expense of paying the departing colonial officers compensation for terminated services as well as retirement benefits in foreign currencies. Many African governments discovered that they couldn’t easily enforce tax collection.

The struggle for independence had been waged precisely because of unfair taxation. They had debts, owed to the former colonial masters.

For instance, Kenya had to take a loan from the British to ‘buy’ back land from the British settlers; which mostly ended up the property of the new/old African elite in the country, who were less inclined to pay taxes on it.

Although some colonial states had budget surpluses at some point or another in time, most of them were struggling financially at the time of decolonization.

Even more troubling for the newly independent African countries, the colonial administration hadn’t invested in policies, structures and manpower to enable the new government collect taxes in an acceptable manner.

Tax evasion and poor tax collection that most African countries suffer today are direct consequences of colonialism.

It seems as if there is a congenital problem in paying taxes in Africa considering that as a form of modern economic and political order, taxation by government tends to be seen as discriminating to the poor.

The common person tends to argue that the rich hardly pay taxes and the government generally wastes the monies it collects.

Although based on the analysis of the tax policies and practices in two former British colonies, Taxing Colonial Africa is a worthy book to read.

It leaves no doubt that in order to understand how and why the question of taxes and taxation is a vexing one in Africa today, everyone interested in it has to go back to the archives and decode how the mzungus decided on levies, collected and used them.

The writer teaches literature at the university of Nairobi. Tom.odhiambo@uonbi.ac.ke. He can also be contacted at +254720009155.

(PHOTO CREDITS: Courtesy NATION)

By

Leonard Wanyama

A version of this article was published in the Daily Nation on 15 September 2020

One of the most perturbing government initiatives in Kenya is the pursuit of double taxation agreements (DTAs) without having an implementation policy in place.

This has left the country exposed to the risk of having its domestic revenue mobilisation efforts undermined by illicit financial flows especially when negotiated with countries that are known tax havens.

Recently Kenya’s Ministry of Finance asked for public submissions on a DTA with Singapore and has been actively working to operationalise a DTA with Mauritius that was previously held up following a challenge in court by Tax Justice Network Africa (TJNA).

It should be noted that according to the Corporate Tax Haven Index both Singapore and Mauritius are in the top 20 most secretive, aggressive and extensive jurisdictions that help multinationals escape paying taxes thereby eroding revenue collection measures in other countries around the world.

Similarly referred to as double taxation treaties (DTTs) or double taxation avoidance agreements (DTAAs), DTAs are international bilateral deals that aim at determining taxation rights between multiple jurisdictions.

The purpose of DTAs is supposed to encourage the sharing of tax information between jurisdictions and promote foreign direct investments by eliminating double taxation.

This is because double taxation, that is, the imposition of tax on the same income by multiple jurisdictions is perceived to discourage the conduct of international trade by dampening foreign direct investment and eventually slowing economic growth.

However, while DTAs are expected to be good instruments in the short term for taxpayers engaging in business across borders, the secrecy and opacity associated with their negotiation plus linkages to tax havens encourages money laundering or other illegal activities that harm countries and the world economy in the long term.

Also, if not properly negotiated and structured according to best practice or international commitments, DTAs serve as a channel for tax avoidance. This is legal planning of an entity’s financial affairs to reduce tax liability within a single territory or several territories to one’s own advantage.

Whereas, tax avoidance may not be an illegal practice, it is considered immoral based on the impact of undermining efforts towards domestic revenue mobilisation and self-sufficiency particularly in developing countries.

For example, the dangerous consequences of tax planning as a result of DTAs can be seen in a recent report by Finance Uncovered and the Daily Nation on how sports betting giant SportPesa dogged its Kenyan tax bill obligations by ‘shifting’ its profits to the United Kingdom.

SportPesa’s UK subsidiary SPS Sportsoft transferred GBP 42 million (KES 5.8 Billion) from its Kenyan operation Pevans East Africa by claiming payment charges for supply “IT and services” used to conduct betting operations within the country.

Despite both being SportPesa facilities, this overcharging of a Kenyan entity for technical services by a UK entity denied the government an opportunity to accurately tax the company on account of an existing 43-year old DTA with Britain.

Such transfer pricing legally allows the manipulation of charges between subsidiaries of a company in different countries to shift profits out of higher tax jurisdictions.

Moreover, such loopholes in DTAs arise as an abuse of the “arm’s length principle” (ALP) which contends that even as entities within the same company, a transaction of parties that are considered subsidiaries of the same company are viewed as independent and on equal footing.

This provides an opportunity for the charges to get inflated, thereby not comparable or realistic if the services were provided at market rates.

Further, it restricts government from raising the necessary revenues needed to deliver better services domestically, ultimately limiting its pool of resources needed for sustainable development.

Kenya has pursued a total of 48 DTAs since independence. At various stages these have been considered, negotiated, concluded, signed and enforced without having a DTA policy in place to guide their development in line the country’s interests or development objectives.

Subsequently, in recent times especially since the passage of Constitution of Kenya 2010 the country has engaged 14 DTAs which, sadly, give away more of Kenya’s taxing rights as compared to those negotiated prior to the new constitution.

This leaves Kenya at risk of haemorrhaging to illicit financial flows with the Kenya Revenue Authority (KRA) fighting to achieve targets with its hands tied behind its back.

Parliament should therefore seek cost benefit analysis and impact assessments for past, present and future DTAs from KRA.

This is in order to understand the amount of tax lost or gained for existing DTAs or those coming into force as a matter of urgent national interest for review and update in conformity with international standards.

The author is the Coordinator of the East African Tax and Governance Network (EATGN); Twitter: @lennwanyama Email: coordinator@eataxgovernance.net

By

Tom Odhiambo

Title – Taxation, Responsiveness and Accountability in Sub-Saharan Africa: The Dynamics of Tax Bargaining Authors – Wilson Prichard Publisher – Cambridge University Press Date – October 2015

The peskiest question about taxes is: how to get people to pay them? But probably the one question that should always precede all debates about taxes is: what happens to the collected monies? These two issues go hand in hand. Collecting taxes is a most basic need of all forms of government these days – whether local or national – for it is the source of their survival. How to use the money collected is increasingly a more difficult question to answer as evidence shows that many tax collectors pilfer a significant part of the taxes and government officials – bureaucrats and politicians – tend to steal some more.

These two subjects are extensively discussed by Wilson Prichard. The book is based on extensive research on ‘bargaining between citizens and governments over tax collection’ in three countries: Kenya, Ethiopia and Ghana. The research cuts across different historical times, looks at diverse tax structures and processes and examines the many ways in which citizens bargain with government over taxes.

The chapter on Kenya is titled ‘Direct and Indirect Tax Bargaining in Kenya, 1963-2008.’ It begins by looking at how politics and government policies affect taxes and taxation. Going back into history, Prichard cites Waris who shows how tax policies in colonial Kenya were affected by the government’s racial categorization, with ‘the White and Asians populations … subjected to income taxes, excise taxes, and import duties, whereas the African population was primarily subjected to a poll tax, which evolved into the Graduated Personal Tax (GPT) late in the colonial period.’

He further shows that with independence there were different forms of taxes introduced in the country including sales tax, which improved revenues but with political uncertainty due to the poor health of the then president, Jomo Kenyatta, in the 1970s there was a slowdown in government revenues. Matters tax improved in the 1980s due to the new government of President Daniel arap Moi. There was more money, especially from the coffee boom of the time, with the government not introducing new taxes in the 1980s. Prichard notes that the government only attempted new tax reforms, which sought to “administrative improvements, reducing income and corporate tax rates, and rationalizing import, excise and sales tax.”

Later, tax revenues fell as the economy declined, ‘politically connected individuals weren’t paying taxes, parastatals failed to remit sales tax revenue, etc’, according to Prichard. The government’s response was to implement value added tax (VAT) in the 1990s, which increased government revenue and was generally not opposed despite adding to the burden of the taxpayers. Fuel levies were later introduced in an attempt to improve revenues for the government. But with local economic troubles of the 1990s, the government attempted more tax reforms in the decade, seeking to increase its revenues, especially by creating the Kenya Revenue Authority (KRA), which brought together different tax bodies in the country.

How did Kenyans negotiate these tax structures and reforms? Because of the reintroduction of multiparty politics in the country in the 1990s, there was a decline in the amount of taxes collected. One explanation offered by Prichard is that there were members of the opposition or individuals who didn’t favour the government and tried to “undermine the fiscal position of the government.” However, the new government in 2002 found a broke state and immediately sought to streamline taxes and taxation. It enjoyed goodwill from the public and tried to responsibly spend the monies it collected by offering free education and allocating part of the national budget to a Constituency Development Fund (CDF).

In a sense, despite the claim to political robustness in Kenya, Prichard argues that there has been little public engagement with the government on taxation. He notes that in the period he studied, only the response to the introduction of Electronic Tax Registers (ETR) and the rejection by MPs and the elite of capital gains tax could be said to have been serious negotiation over taxation. The ETRs were eventually introduced. But for indirect bargaining, the citizens always find a way around paying taxes.

In the case of Ethiopia, Prichard again takes the reader through the history of the country. He shows how the Ethiopian experience is unique in Africa because the country was never colonized, save for a brief period of Italian occupation. Consequently, the tax tradition in Ethiopia has largely been indigenous and dependent on the relationship between the state, the church and the local populations. Prichard records that there is evidence of longstanding conflicts between the local populations and the Imperial state over taxation, with the Ethiopian Orthodox Church thrown in the mix. But it is the regime after the deposition of the Emperor Haile Selassie in 1974 that Prichard studies in this book.

Prichard argues that the case of Ethiopia is made interesting by the fact that in the period studied, the military state was ‘comparatively autocratic’, thus ‘limiting the taxpayer capacity for collective action and the scope of institutions that could facilitate tax bargaining.’ But he shows that although there was little space to negotiate taxes centrally, there was evidence that there were possibilities for direct tax negotiation regionally. The military regime could control the centre but because Ethiopia had a federal system of government, citizens could pressure local governments over taxes and taxation. Even when the government adopted socialist policies and nationalized the economy, it struggled to raise revenue.

The post-military regime of the 1990s allowed political decentralization as well as some form of economic liberalization. The central government, though, still had a larger role to play in the economy, especially in setting tax policies. But Prichard writes that despite the loosening of the political and economic environments, there has been little engagement with the government over taxation: “… overt political conflict over taxation at the national level has been virtually non-existent”. He further notes that there was “no evidence of direct tax bargaining; even civil society engagement with tax issues has been extremely rare, with even the major business associations playing a primarily informational, rather than advocacy, role” at the time he conducted his study. It seems that as Ethiopia recovered from military rule and civil war, the state was more or less left alone to decide on tax and taxation, with the citizens unable or unwilling to engage with the government.

The third case that Prichard looks at Ghana. Indeed, Ghana is the focus of the first section of the book. In this case, Prichard traces tax policies in Ghana between 1981 and 2008, from the military rule into democracy. The military regime, though, had consolidated tax collection systems and policies in the early 1980s, even managing to increase revenues from tax, largely based on the good prices of Ghana’s exports, especially cocoa. Also, later, the government set up Citizens’ Vetting Committees, which identified individuals who appeared to have too much money but whose source could not be legitimately identified. These people were then taxed.

However, exports of raw materials are always subject to global price fluctuation. Ghana would be faced with the decline in exports and, therefore, less tax collections. All this time, Prichard suggests, there was little overt opposition to government policies, but things changed when Ghana democratized in the 1990s. The expanded political space enabled citizens to challenge government economic policies, especially on taxation. Ghanaians would reject increases in petrol prices, object to the introduction of VAT, and generally had a public say on tax policies. Prichard notes that of the three cases, Ghana showed the most robust engagement by citizens on matters tax, questioning the government’s polices as well as accountability for monies collected.

Why would this study concern us today? The simple answer is that everyone pays tax in one form of the other and so they should be interested in any discussion on taxes. Yet evidence shows that few citizens bother about government tax policies, often only reacting to how the government spends the money collected. Voluntary compliance with paying tax tends to be more of a wish than a fact. However, individuals are more likely to pay taxes when they can clearly understand government policies on tax and ‘see’ the direct (and indirect) benefits of the taxes collected. Taxation, Responsiveness and Accountability in Sub-Saharan Africa: The Dynamics of Tax Bargaining should spur more enquiries into how African governments set their economic policies and how such plans affect their citizens’ response to taxation.

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

By

Tom Odhiambo

Title: Financing Africa; Author: Attiya Waris; Paperback: 214 pages; Publisher: Langaa Rpcig (November 12, 2019); Language: English

Talk about taxes or taxation to anyone on the streets anywhere in the world and chances are that the conversation will lead to a complaint about how government is taxing its citizens but not providing services. In many parts of Africa this complaint will be about how government is taking too much from its people and doing little with it. The problem is couched in the language of corruption. In the end, the common refrain is that corruption eats much of what is collected as taxes in Africa.

The consequence is that African countries have never been able to finance their budgets and development programs through taxation. African countries either cannot properly collect taxes or where the taxes are significantly collected, a big percentage goes into individual pockets. Whatever goes to the government is further lost in misappropriation by ministries, departments, agencies and their officers. The stolen money is in turn banked outside the continent in tax havens. This is a conundrum that African countries seem unable to resolve.

Which is why debates about Africa financing itself are important. Can African governments collect enough taxes to pay for services, goods, development and save? Can Africa rely on its own resources to improve the quality of life of its people? And even if African governments were to effectively collect taxes, how do ordinary citizens ensure that they know how much is collected, how it is spent, and where it is spent? In other words, how do the taxpayers guarantee fairness in the collection and use of taxes?

In Financing Africa (Langaa RPCIG, 2019), Attiya Waris asks the questions posed above but from a legal perspective. Should there be laws that govern how much the government can tax its citizens? Should the law also spell out how money collected from taxes can and should be spent? What should be government policy and country law on the debt that a country can incur? In other words, how much should a country be allowed to borrow internally and externally? What should be the debt ceiling, if at all it should be there?

These questions have a direct bearing on the form of government in any country. The system of governance be it in a centralized or unitary system as opposed to a devolved or decentralized system may determine how much the government collects from different sectors or the economy as well as regions of the country. Also, the system determines who collects taxes, where they go to, how they are shared out, and who accounts for it. Most African countries run a centralized system of governance where the central authority determines taxes, and the sharing and use of the collected revenue.

The problem with this system, as opposed to the devolved form of government is that it is difficult to hold officials at the centre accountable. In many instances, the decisions involving taxes are not consultative or shared. The top-down approach to revenue collection or use means that the common citizens have little information and control over the process. The government is a big brother who cannot easily be questioned. In the devolved system, citizens may demand at the local level to be involved in determining the use of their taxes even if they may not have input on what percentage of their income is collected, when, by who, and for what reason.

Waris suggests that fiscal decentralization takes three forms: fiscal autonomy, assigned revenues systems and fiscal transfers. In the first one the local authorities determine what types of taxes to collect and how to use the revenue, and only depend on their own resources. In the second, ‘each devolved unit receives taxation revenue generated within its jurisdiction.’

Under fiscal transfers the powers to determine tax type, percentage and collection remain with the central government. Local governments may collect some taxes, but they depend on the central government for expenditure allocations. These models have different results, according to Waris, in different African countries. For instance, Kenya uses the fiscal transfers’ policy despite having a devolved system of government. But the county governments are always complaining that they don’t receive their revenue allocations for expenditure on time, with salaries and services suffering.

Yet, despite what the law says, many scholars agree that taxation should follow a set of principles that are known and agreeable to the taxpayer. The taxpayer should also be able to understand what the reason and process of taxation means. These canons demand that taxation should be equitable and about equality so that there is some sense of economic justice for all citizens. This means that taxes should be paid according to one’s income, ability and the benefits they derive from government services and goods.

Taxes should be ‘certain, and not arbitrary’. The taxpayer should not spend extra time or resources trying to decipher how and why they are paying taxes. It should also be convenient to the taxpayer to pay their dues, just as it should be affordable. In many cases evidence suggests that tax collection in African countries is too expensive because of inefficient systems. Also, taxes should be productive, allowing the government to budget and finance its expenditures without having to borrow or borrow too much. Taxes should be flexible such that the government can vary them depending on economic realities of the days, such as the reduction of personal income tax in Kenya because of COVID-19. It should also be simple so that all and sundry can understand its workings. Lastly, there should be diversification in taxes in order to increase the government revenue streams.

The lack of tax diversity in Africa is a big problem. Too many countries depend on a single or a few sources of tax revenue such as oil, cash crops or tourism. In case of any global economic or financial instability which affects the prices of these commodities, such economies suffer significantly as the government is unable to collect enough taxes. The consequence is an unending dependence on loans and grants from bilateral and multilateral donors.

Yet, if African countries had proper laws and policies governing their tax systems, which laws and policies are understood by every citizen who is obliged to pay taxes and the authorities that collect the taxes and government officials who spend the revenue, then they wouldn’t be dependent so much on borrowing expensive loans and donors. Consequently, Waris suggests that governments need to ‘develop compliant taxpayers by helping citizens understand why and how to pay taxes, as well as how the collected revenue is used and how they benefit. She also suggests that African governments need to have laws that determine the limits of debts that governments can incur, how much they gain from international treaties and have controlled access to the loan’s markets. With such an approach to taxes, taxation and collection of revenues, African governments could finance their fiscal needs.

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

By

Leonard Wanyama

Book Title: Trade is War; Author: Yash Tandon; New York and London; Publisher: O/R Books; 2015; 2015; Pages: 211pp

[This article was first published in the Saturday Nation on 12 December 2015 and the Society for International Development (SID) website at the time of the World Trade Organisation 10^th Ministerial Conference (WTO-MC10) in Nairobi. It’s republished on the Tax Rights Blog considering recent animated trade events in relation to the launch of US-Kenya Free Trade Agreement (FTA) negotiations. Also, this book review is relevant bearing in mind the selection, by the Kenya Government, of Ambassador Amina Mohammed to vie for the position of World Trade Organisation (WTO) Director General.]

If you think the only war Kenya faces is that of terrorism against the Al-Shabaab, you are either dead wrong or walking around with your eyes blind open. Recent events in past weeks obviously point to our struggles against corruption while our daily lives comprise various fights against either poverty, ignorance, disease, potholes, El Nino or a combination of all these.

As we head towards another very globally local event, in hosting the World Trade Organization (WTO) 10^th Ministerial Conference (MC10), Professor Yash Tandon reminds us in a new book that Trade is War.

Professor Tandon informs readers, from developing countries, that if peace is to be achieved then there must be preparations for war. The ways of war in trade may not be literally fought with Kalashnikovs but the outcomes are just as bad if not worse.

When countries lose livelihoods, communities have their industries dissipated, societies have their economies laid to waste and peoples’ lives are destroyed in much the same way as it happens in physical conflict -because of trade negotiations- then trade is truly an act of war. These loses ultimately strip away the dignity of individuals to the point of them being the walking-living-dead.

With such high stakes, trade is indeed a theatre of warfare for which developing countries must never surrender especially based on expected losses to lives of the downtrodden. Professor Tandon therefore looks towards hope from people power and he urges keeping faith in what it means to pursue freedom. Relying on 30 years of experiences as a scholar, activist or trade advisor in East and Southern Africa Tandon’s book takes you through various locations and shifts through different situations.

You see the experiences of normal people from villages to cities and ultimately different countries. It places characters in their global position within the international political hierarchy of trade relations. This movement paints a fast-paced picture of trade as a form of combat. Readers will quickly get the feel of negotiations in real time ‘jujitsu’ as interests are pushed or resisted by many parties.

Reading this book is important in order to appreciate the predicament of developing countries in international economics in an unsophisticated way. As a political economist, all things held constant, the author’s preoccupation with using simplified language throughout the book is a godsend for any reader. It helps that one won’t have to encounter a moment of explanations about what Pareto optimality is.

WTO is a monolith for which Professor Tandon points is an example that ‘The Empire still lives’. This is through subtle or not so subtle machinations of major power alliances. Hosting the M10 in Nairobi this December will therefore locate the theatre of battle against empire right at Kenya’s doorstep.

The obviously vicious struggles on points of definition overgrowth and development will extend to language in term of where to place punctuation as well. Its clear traditional bureaucratic tactics that paralyze processes will be employed to stall demands by developing nations and their respective citizens.

Tandon recommends that standing up to Empire is therefore not about bellicose braggadocio. It is a combination of bipartisan patriotism within states and committed dedication across social movements to achieve fairness for the meek. This revolutionary Pan-Africanist of yore is grounded in the logic of combat but doesn’t advocate for its action. He thereby advocates for a longer term and lasting non-violent approaches based on being tactful.

It is apparent that African diplomats, Kenyan ones, specifically, need to write more books on the continents external relations in the world. These should be based on current issues on the foundation of their experiences rather than the popular ‘rags to riches’, ‘how did I succeed’ or ‘I made it’ accounts they opt for. This is a book every WTO participant or journalist covering events should get their hands on before they walk into the ‘green’ rooms in Nairobi or after. It is available in local bookshops and you will read it in a day.

The author is the coordinator of the East African Tax and Governance Network (EATGN); Email – lwanyama@taxjusticeafrica.net

(Photo Credits: Courtesy Econews Africa)

By Professor Uche Ewelukwa Ofodile, SJD (Harvard)

On March 2020, at the direction of President Donald J. Trump, the United States Trade Representative (USTR) Robert Lighthizer notified Congress that the Trump Administration will negotiate a free trade agreement (FTA) with Kenya. “Under President Trump‘s leadership, we look forward to negotiating and concluding a comprehensive, high standard agreement with Kenya that can serve as a model for additional trade agreements across Africa”, said Ambassador Lighthizer, in the said letter. According to the USTR, the proposed FTA intends to ―build on the objectives of the African Growth and Opportunity Act (AGOA) and serve as an enduring foundation to expand U.S.-Africa trade and investment across the continent.

If and when the Kenya-U.S. FTA negotiation commences, the U.S. will not be negotiating in a vacuum. The U.S. will be negotiating the Kenya-U.S. FTA against the backdrop of some recent trade negotiations involving the United States and against the backdrop of key U.S legislations, executive orders, and policy actions that collectively shed light on the negotiating priorities, strategies, and motivations of the United States. Key legislations, executive orders, and policy actions include:

1. Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (a.k.a. Trade Promotion Authority)
2. United States-Kenya Negotiations: Summary of Specific Negotiating Objectives, (May 22, 2020). On May 22, 2020, Office of the U.S. Trade Representative (USTR) released the specific negotiating objectives of the proposed U.S.-Kenya Free Trade Agreement.
3. The Trump Administration, “America First” Strategy.

Comprehensive trade deals of the size envisioned by the United States are not easy to pull off. The United States will undoubtedly be the more dominant player in a Kenya-U.S. FTA negotiation. Indeed, experts agree that few countries come close to negotiating on parity with Washington. For both sides, it will undoubtedly be a long path to negotiations. Consequently, it is important that the Kenyan Government is fully briefed on:

1. The critical pillars of President Trump‘s trade policy.
2. The critical aspects of President Trump‘s trade strategy and capacity.
3. The important lessons that Kenya could draw from recent trade negotiations and/or deals involving the United States.
4. The potential risks to domestic regulatory space of a comprehensive Kenya-U.S. FTA.
5. The potential risks to domestic and regional policy coherence of a comprehensive Kenya-U.S. FTA.
6. Controversial issues that might prolong talks.

(courtesy: GLOBAL ALLIANCE FOR TAX JUSTICE)

The COVID-19 pandemic exacerbates the wealth redistribution crisis and those hit harder are women and vulnerable groups at the intersections of inequalities. Economic experts from civil society highlight the many alarm bells ringing, that all point to the need for taxation reform to ensure fair distribution of resources. We simply won’t tackle this crisis conjuncture without tax justice.

By Caroline Othim, Global Alliance for Tax Justice and Roosje Saalbrink, Womankind Worldwide as Co-coordinators of the GATJ Tax and Gender Working Group.

How did we get where we are?

The COVID-19 crisis reveals failures of neoliberalism and patriarchy: Evidence shows that the COVID-19 pandemic is deepening pre-existing inequalities and exposing vulnerabilities in our current social, political and economic systems brought about by neoliberalism informed by capitalism, patriarchal and racist systems of discrimination and a history of colonialism. People in all countries at all levels of development are affected but countries in the Global South and particularly women and vulnerable groups are hard hit as governments and health authorities strive to limit widespread infections of COVID-19 and mitigate economic fallout. While neoliberalism and patriarchal norms continue to undermine, subvert and ignore women’s rights.

Industrialised levels of tax evasion and avoidance has left many countries lacking the resources to fund public services. In consequence, healthcare systems in countries in the Global South are also woefully understaffed and underfunded with public healthcare workers missing personal protective equipment like masks, gloves and isolation centres lacking ventilators for critical patients. Millions of people in the Global South also do not have access to adequate healthcare and live in crowded informal settlements where social distancing is impossible, many more also do not have access to clean water to practice hand washing techniques which is now a privilege for some in the society.

“As with the climate crisis, the heaviest COVID-19 burden is loaded on those most vulnerable. The poorest are affected first and worst.”

(PHOTO CREDITS: Courtesy EURACTIV )

The question of tax avoidance and financial information exchange remains a sore point for EU-African relations, and the European Commission’s annual lists of ‘non-cooperative’ countries on tax and money laundering laws have done little to improve the situation.

Botswana, Ghana and Zimbabwe joined Mauritius in being publicly named and shamed by the European Commission in May on its EU list of high-risk third countries with deficiencies in their fight against money launderers and terrorism financing.

The Commission insists that the listing is for countries that “pose significant threats to the financial system of the Union” because of failings in tackling money laundering and terrorism financing.

Inclusion on the EU list means that banks and other financial institutions will need to conduct enhanced due diligence (EDD) measures in any transaction or business relationship with a person established in a high-risk third country. Meanwhile, companies located there are prohibited from receiving EU funds.

While Mauritius was warned at the start of the year that it faced being penalised because of its banks’ failure to tackle terrorist financing, several of the other countries were surprised by their listing.

The Ghanaian government complained that the listing “does not reflect Ghana’s anti-money laundering regime.”

The Commission’s country recommendations now have to be approved by the European Parliament in order to come into force in October.

Much of the frustration against the EU’s tactics is because the international rule-book on tax avoidance and money laundering is set by the Paris-based Organisation for Economic Co-operation and Development (OECD), a group of 35 wealthy nations which does not include a single African country.

(PHOTO CREDITS: Courtesy International Center for Tax and Development)

The OECD secretariat recently proposed a “stock taking exercise” to “re-examine how international tax rules currently meet the needs of developing countries” leading potentially to a “new deal on international taxation as part of the international effort to rebuild economic life in the post Covid-19 era.” The OECD’s Pascal Saint-Amans has suggested that this may be a third pillar, in addition to the two-pillar global negotiation process currently underway.

We asked recent ICTD contributors on international tax for their ideas and suggestions for what a ‘new deal’ should look like for developing countries, and received ten submissions from writers on four continents: