By
Brenda Osoro
On November 3, 2020, the Tax Justice Network Africa (TJNA) and the East African Tax and Governance Network (EATGN) jointly submitted feedback on the revised Double Taxation Avoidance Agreement (DTAA) between Kenya and Mauritius to the National Assembly Committee for Finance and Planning.
In an unprecedented move, the High Court had declared the previous DTAA unconstitutional in response to a petition by TJNA. The court held that the DTAA lacked approval from the National Assembly, violating the Statutory Instruments Act, 2013, and the Treaty Making and Ratification Act of 2013.
TJNA contended that while the DTAA was invalidated, the court ruling did not delve into the substance of the matter or address the technical issues raised.
The submission aimed to prompt Parliament to fully exercise its powers in scrutinizing the Mauritius treaty, advocating for the people’s benefit and urging the government to align it with Kenya’s development objectives.
Leonard Wanyama, EATGN coordinator, expressed gratitude to the committee for allowing public consultation and presented documents highlighting key technical issues on the Kenya-Mauritius DTAA along with considerations for the parliamentary committee.
During the committee’s discussions, Kitutu Chache MP Jimmy Angwenyi raised a crucial question about the relevance of DTAAs. Executive Director Alvin Mosioma explained that DTAAs offer reassurance to foreign businesses, fostering inward investment. However, expert reports indicated that this specific treaty could encourage multinational enterprises (MNEs) to establish entities in tax havens like Mauritius, enabling treaty shopping and round-tripping in Kenya’s service provision.
This approach could unfairly favor foreign businesses, discourage local enterprises offering similar services, and hinder employment in Kenya. Concerned MPs sought evidence of DTAA abuse and best practice suggestions, with EATGN/TJNA proposing the ATAF treaty model as suitable for African countries.
Responding to these concerns, TJNA/EATGN urged the parliamentary committee to summon the Kenya Revenue Authority (KRA) and request concrete data on the economic gains of the DTAA. They also called for an examination of whether the DTAA violated the principle of tax neutrality and if it followed the ATAF model treaty, most suitable for developing countries.
Lastly, the committee, chaired by Homa Bay Women Representative Hon. Gladys Wanga, commended EATGN/TJNA for raising these issues. The committee pledged to investigate the Treasury, KRA, and other stakeholders involved in the treaty signing, emphasizing the need for transparency and accountability in the process.
