(PHOTO CREDITS: Global Alliance for Tax Justice)

It’s time to put a sharp gender lens on taxation policies and practices and implement tax justice measures that will ensure greater gender equality. And it’s time we made our civil society voices heard for this demand!

By Dereje Alemayehu and Alvin Mosioma

Every year at this time, our members in the five continents carry out different activities to explain how tax justice can finance gender equality, while official delegates discuss women’s rights at the United Nations Commission on the Status of Women (UNCSW).

This year, UN member states were to review the ambitious engagements taken towards women’s rights, in Beijing 25 years ago. It was planned to address the critical issue that not a single country has reached gender equality since Beijing. Understandably, due to public health concerns occasioned by the outbreak of the coronavirus, the much-awaited UNCSW was postponed. The whole event was shortened to a one-day ‘procedural’ meeting on March 9th.

This happened just when activists were readying to head to NYC to challenge UNCSW not to limit itself to rhetoric and lamentations when dealing with the lagging behind of each member state in progress towards gender equality and to address the elephant in the room – the financing of women’s rights! 

(PHOTO CREDITS: Tax Justice Network Africa)

In a world catering to every pleasure and individualistic desire, the banana seems to be the one thing rocking everybody’s socks off. Why else is this common denominator available at roughly the same price in your local supermarket winter to summer, 365 days a year? Is someone getting ripped off to maintain this price? In this blog, we will consider how the low price of bananas works, where women are in the global trade of bananas, and sketch out illicit financial flows within the process.

The global economy and international relations is often considered in gender-neutral language, unless you’re pursuing a specifically gendered issue like the gender pay gap. Yet as captured by Cynthia Enloe, renowned feminist and scholar of international relations, in her delightfully snarky read ‘Bananas, Beaches and Bases: Making Feminist Sense of International Politics‘, gender relations are in fact entrenched in everything created by human beings, even in the international trade of bananas.

In her book (2014) Enloe, asks the question of where women are in the international politics of bananas. She calls on each one of us to ‘exercise genuine curiosity’ about each woman in this international system, whether she is the domestic worker in the CEO’s home, packing crates in a banana warehouse or the grocery-shopping housewife. Feminists are to think about those actors within the global economy system, extending your imagination to ‘those women you have yet to think about.

(PHOTO CREDITS: Tax Justice Network Africa)

Background

The OECD Inclusive Framework on BEPS (‘Inclusive Framework’) has been discussing taxation of transnational corporations and tax challenges arising from the digitalization of the economy. The impossibility of ring-fencing only the digital economy means that this has opened up a more fundamental discussion on the design of the international tax system. The ‘Inclusive Framework’ agreed on a Programme of Work, published in May 2019, that outlined their work on these reforms.

These reforms are being discussed in the Inclusive Framework under two ‘pillars’:

• Pillar 1 opens up the more fundamental question on taxing rights and where corporate profits should be taxed. This discussion is crucial for developing countries who have long raised concerns about the issue of allocation of taxing rights being skewed in favour of developed countries.
• Pillar 2 concerns the question of whether profits of transnational corporations should be subject to some sort of a minimum rate of tax.

On 9th October 2019, under pillar 1, the OECD Secretariat published its ‘unified approach’ proposal which starts to outline a new system for allocating taxing rights. The proposal claimed to combine elements of three proposals which were originally put forward by USA, UK and G24, and were included in the agreed work programme of the Inclusive Framework. In reality, the OECD Secretariat’s proposal unfortunately ignored the central elements of the G24 proposal and has been criticized by academics such as Prof. Stiglitz and Prof. Ocampo, for the reform likely benefitting OECD countries at the cost of developing countries’ interests.

On 8th November 2019, under pillar 2, the OECD Secretariat published its ‘Global Anti-Base Erosion’ (GloBE) Proposal. However, since the proposal still leaves a number of key questions unanswered, it remains unclear to what extent pillar 2 discussions would benefit developing countries. It is also unclear whether this proposal might benefit residence countries (where the companies are headquartered) or source countries (where companies do business).

On 31 January 2020, the OECD Secretariat announced that the Inclusive Framework has now agreed to go ahead with the ‘unified approach’. This is now the basis of negotiations at the OECD Inclusive Framework and no longer just an OECD Secretariat proposal. The G24 proposal, championed by several developing countries within the OECD Inclusive Framework, is now effectively off the table.

Having been built on top of the tax practices within the imperial trading blocs of the 1920s, the international tax system has historically been against developing country interests. The direction of current reforms in the OECD Inclusive Framework will only end up reinforcing this status quo. With the OECD Inclusive Framework mandated by the G20 to find a solution by the end of 2020, it is crucial for developing countries to consider how they respond collectively and strategically this year. It is time for developing countries to look beyond the OECD.

PHOTO CREDITS: Courtesy 5 Star iGaming Media

By Leonard Wanyama

Ronald Karauri, the CEO of Kenyan online betting giant, Sportpesa, caused a mild uproar when he announced that the firm was withdrawing the full value of all its local sponsorships on account of the proposed taxes that have been placed on the gaming industry.

Captain Karauri has admittedly compared the taxes of the betting, gaming and lottery industry to those taxes imposed on alcohol or the cigarette sectors which have established negative side effects to society despite being legal.

However, his qualms with current government proposals are that they are unfair in as much as they solely burden betting companies unlike in the tobacco or alcohol industries where the ‘sin tax’ is passed on to the consumer.

Sportpesa’s withdrawal of sports sponsorships has been met with an immediate backlash as its actions smack of blackmail especially as the public perceives the company to be more comfortable with paying higher taxes in western jurisdictions, where it operates, as compared to local rates.

This raises issues of tax injustice in regards to why a local company would be more comfortable with following rules in foreign lands as opposed to its own homeland. Kenya’s tax rates are comparatively lower to those of other countries around the world where it willingly pays more.

What is even more worrying is that this is especially critical in a context where the massive advertisements and promotion of betting companies, particularly through its sponsorships, do not protect children from undue exposure to enticing messaging.

This is despite consistent news reports of suicides and addictive or compulsive disorders among young adults that are associated with betting. Combining this with emerging anecdotal evidence as to how online betting has reduced levels of productivity in mostly poor communities’ shows how problematic this activity is.

Dr. Mukhisa Kituyi of the United Nations Conference on Trade and Development (UNCTAD) is on record stating “…you are seeing the sports gambling in Kenya today but nobody tells the gambling firms not to accept money from poor gamblers. It is the poor who must be told that they will live with the consequences of dreaming that gambling is an investment…”

Sportpesa’s act of sponsorship withdrawals can therefore be interpreted as an act of industry intimidation. The company is taking advantage of the fact that there is currently no direct evidence attributing these societal problems to its activities.

Yet emerging studies, like the Implications of Sports Betting in Kenya by Amani Mwadime submitted to the Chandaria School of Business at the United States International University (USIU) in 2017 estimates that 2 million people in Nairobi alone participate in online betting.

By ignoring the ramifications of such exploratory data, the betting industry is therefore reading from the same old big corporate interference script to push scaremongering or confusing arguments like; the tax effect will lead to losses in jobs, incomes and the relocation of the company – all of which have already been done before.

Chapter 12 of the constitution on public finance management requires the creation of a tax system that promotes an equitable society. That means companies like Sportpesa are obligated to engage in good management practice by not holding the country at ransom as demonstrated in the sports industry.

Responsible corporate governance means that there is adherence to the law and in this regard, the regulations pertaining to taxation. It is only in this way that governments can derive the necessary financing to drive sustainable development.

Ultimately, whether or not Sportpesa continues to sponsor local teams, a fair outcome should ensure that betting companies pay their fair share of tax commensurate to the social costs of legal gambling in Kenya while remaining compliant within its dealings.

The author is the acting coordinator of the East African Tax and Governance Network (EATGN). Email: lwanyama@taxjusticeafrica.net Follow on Twitter @lennwanyama

By Leonard Wanyama

Ongoing revelations of corruption in state institutions, are drawing massive citizen indignation as details on the scale and magnitude in new incidences of public theft continue to emerge.

News of the second scandal at the National Youth Service (NYS), coupled with other reports such as the nefarious maize and fertilizer issues at the National Cereals and Produce Board (NCPB), payment irregularities at the Kenya Power and Lighting Company (KPLC), controversy at the Kenya Pipeline Company (KPC) among others, are enraging Kenyans.

This is, however, resulting in growing resentment towards financial institutions which are now being viewed as major accomplices to mega- corruption on account of being conduits for stolen public funds from state institutions.

Banks are being particularly singled out for facilitating this vice despite being able to prevent or even stop illegal monetary dealings based on knowing the owners of accounts in their facilities, and the ability to detect suspicious transactions by use of customer identification or profile data in their custody.

However, it seems that the banking sector’s hubristic concern for bottom- lines alone, has blinded it to how mega corruption is detrimental to the crucial implementation of trade and investment activities needed to spur widespread growth across Kenya.

Corruption, and the illicit financial flows that accompany it, cause massive losses to the country owing to how they distort revenue collection, allocation and expenditure processes thereby perpetuating the vicious cycle of poverty within the country.

This phenomenon not only jeopardises development programmes, but it also damns the country by entrenching structural and systemic inequality plus undermining socio-economic institutions. It also prevents opportunities for international cooperation due to a loss in foreign investor confidence.

Kenya’s economy is transitioning from its informal cash based systems- which are confounded by the country’s weak regulatory structures and poor supervisory frameworks- in order to restrict the proceeds from crime being infused into its financial system.

As a means of institutionalising transparency and accountability within the system, the government established the Financial Reporting Centre (FRC), a financial intelligence unit within the Central Bank of Kenya (CBK), under the Proceeds of Crime and Anti-Money Laundering Act, 2009 (POCAMLA 2009).

However, further amendments to the law in 2017 heightened financial surveillance and enabled the prosecution of individuals and organisations facilitating corruption, money laundering and illicit financial flows especially bank officials who fail to comply with reporting obligations, thereby abetting these financial offences.

Banks should therefore be at the forefront of implementing these national disclosure processes and mechanisms in order to help curb white- collar crime by encouraging transparency that lifts the veil of secrecy that has enabled, for a long time, state thievery.

Following the exposés, the Kenya Private Sector Alliance (KEPSA) was quick to issue a statement distancing itself from the named individuals and their business entities, clarifying that they were not members of KEPSA in any way, shape or form.

However it also noted a high possibility that some of its members, within the banking sector, were likely to have been involved in siphoning funds stolen from state coffers and would therefore be available to support efforts in identifying them.

As Phase II of these investigations gets underway, it is important to not only identify the business entities that benefited from these fraudulent payments but also name the commercial banks that were complicit.

KEPSA should therefore take advantage of POCAMLA 2017 amendments to heavily penalise any of its members who get involved in graft.

The Kenya Bankers Association (KBA) should also complement this by tightening their internal and external measures in order to curb money- laundering especially in light of the fact that under the new law, individuals and corporates found guilty can be fined up to  KES 5 million and KES 25 million respectively.

The author is coordinator of the East Africa Tax and Governance Network Follow @EATGN Email: lwanyama@taxjusticeafrica.net

By Leonard Wanyama

Listening to government officials explaining policy positions exposes how out of touch they seem to be with the public’s concerns about how their country is run on a daily basis.

Sitting in on the recent Kenya Alliance of Resident Associations (KARA) bi-monthly meeting on 20 March 2018, it was clear that state functionaries need to communicate their policies a lot better than is currently the case.

The meeting examined the options for Kenya’s debt sustainability in light of existing debates which have unfortunately slipped into the typical dichotomy of whether the issue at hand is simply good or bad.  

Obviously, such a subject that is likely to affect 40 million plus Kenyans is never that clear-cut.

While it is commendable that government officials are taking time to explain economic policy in line with the spirit of public participation; they are still not adequately responding to citizens’ fears over how the acquisition of these loans will directly impact them.

Kenyans are concerned that much of the economic brunt of continuously- borrowed money will negatively affect the majority poor and the middle classes significantly more than the rich in relation to the proposed increase in taxes.

They are also worried that the country is getting into a cycle of debt in which it is taking up one loan to pay off another thereby leaving very little or no resources available for the required investments to uplift its citizens from poverty.

Public scepticism, critique and complaints over debt are therefore well founded in a long history of always getting poor returns on investments whether it is in terms of implementation of projects or administration of previous debt that has led to growing inequalities within Kenyan society.

Knowing your audience is therefore a very important aspect of any public engagement.

Bureaucrats should therefore not respond to members of the public by labelling them as intrinsically unpatriotic, pessimistic, overly political, ungrateful, or downright lazy, as it happened in not so many words.

This not only smirks of a very dismissive attitude towards the democratic mechanics of Kenyan political processes but is also very disrespectful of citizens who have taken time to engage on such subjects in a constructive manner.

Consequently, officials should consider taking note of the following when they discuss issues of Kenyan debt.

Much of the public cynicism arises from the fact that as the country borrows more money there are people-both within or outside government-who are always angling to steal large sums from state coffers. This thereby jeopardises the ability to service payments of these loans in one form or the other.

While it is clear that the country’s debt is still within constitutional, legal and international best practice thresholds, it doesn’t help to insist on using outlandish comparisons to make the point that all is well in the country.

Using the example that Kenya’s debt is okay just because its loans are way below those of Japan, the United States or Singapore without any reference to the fact that these countries experience much lower levels of corruption is disingenuous.

Secondly, government officials should learn to answer immediate citizen policy queries more directly.

Kenyans are eager to know what effect the acquisition of these new loans will have on current policies towards income tax and value added tax (VAT), because this is where the shoe pinches.

Not speaking to these taxation dynamics increasingly offends public sensibilities about government priorities.

Therefore, if these issues are continually not addressed conversations around debt sound more and more like a story of a man who has a crack in his water bucket. While fetching water in this cracked container the man tells everyone he is better off than his poor neighbour who has a hole in her pail.

Meanwhile, he also claims that because his bucket is the same colour as his neighbour’s Jacuzzi, it holds water just as well the rich man’s bathtub and therefore no one has any right to point out that his bucket is leaking.

Government officials should therefore stop acting like the imprudent man and listen carefully to the citizens’ interrogations on the crack in the bucket, so that they can address public concerns adequately.

The author is the acting coordinator of the East African Tax and Governance Network (EATGN). Email: lwanyama@taxjusticeafrica.net Follow on Twitter @lennwanyama