AFRICANGLOBE – $21-32 trillion has been siphoned off into tax havens, and now there is evidence to suggest the City of London is trying to make Kenya the world’s next tax avoidance hub.
If anyone doubted the sheer scale of corporate power and the importance of tax havens to it, they had the unedifying spectacle of Tim Cook, CEO of Apple, to enlighten them last month.
In already infamous evidence to a US Senate Committee, Cook demonstrated that the international tax system is broken and big corporations are the last people to fix it. He said outright that he won’t consider repatriating the staggering $100 billion they have hoarded offshore if it means paying standard US corporation tax.
This is just businesses doing what businesses do.
Apple are not going to voluntarily take on extra costs, regardless of moral argument, when they do not have to and their competitors are not. The problem is structural, not individual.
This is why, if the tax-avoiding instincts of companies like Apple – along with Glencore, Google, Starbucks, and in fact most large multinationals – are to be neutralised, the only thing to do is tackle the system of tax havens that makes every individual example of avoidance possible.
The imperative is overwhelming. Tax havens exist for one purpose only: to provide a way for the rich to get around the taxes that pay for the infrastructure and services on which we – and they – rely.
Tax havens have become, over the last 30 years, a key driver of vast inequalities around the world. The system has grown so big that it is now an arterial drain on public budgets everywhere.
According to James Henry, ex-Chief Economist of McKinsey, somewhere between $21 and 32 trillion has been siphoned away from the mainstream economy through these means.
Kenya: A Future Tax Haven?
The global tax haven system is a network with many parts, and the more parts, the more extensive and powerful the network. 30 years ago, there were a handful of relatively small tax havens, serving a small elite. Today, there are more than 80, and they are a parasite on the mainstream, public economy.
There is now mounting evidence that elite financial interests are planning to create a new tax haven – to add another node to the global spider web.
This time it is on the African continent, which already gives far more to than it receives from the world economy.
According to a recent report from the African Development Bank and Global Financial Integrity, Africa has already lost in the region of $1.4 trillion in illicit financial flows between 1980 and 2009.
If successful, this hub will be a key mechanism to extract even more wealth from some of the world’s poorest countries.
Until now, there hasn’t been a major tax haven in mainland Africa. Attempts have been made in the past to create one – always at the behest of huge, Western financial institutions, be that Barclays’ efforts in Ghana or the bungled attempts in Botswana – but we may now be looking at the most serious attempt to date. Kenya, it seems, may be in the sights of the tax haven capital of the world: The City of London.
This time, the Corporation of the City of London is trying to expand its shadow economy into Kenya. The City of London and its ‘independent’ lobbying arm, CityUK, have been conducting high-level negotiations to help the country develop as an ‘International Financial Centre’.
This may sound like a benign and even worthwhile activity. Kenya, after all, must develop, and being an International Financial Centre sounds like a good way of going about it. But what does being an “International Financial Centre” actually mean?
When speaking to business insiders, the Kenyan authorities are clear. Alex Owino, a project manager at Kenya’s Finance Ministry, told a meeting in the City of London in 2011 that they plan for Nairobi to become a regional ‘offshore’ financial services hub, modelled on Ireland.
Nick Shaxson, author of Treasure Islands: Tax Havens and the Men who Stole the World, has no doubts. “Make no mistake. This is a tax haven they want to set up. International Financial Centre is a euphemism”, he says.
Commenting on their inspiration, he continues, “Ireland is a swamp of regulatory laxity, which is how they have attracted so much money. This is the business model of a tax haven: secrecy, financial regulatory laxity, tax loopholes. What is Kenya’s offering going to be?”
The City of London’s Long Arms
Being the midwife of new tax havens is increasingly a feature of the City of London’s offering to the world.
For a start, there is the public record of what the City of London Corporation and CityUK do as a matter of course. They regularly lobby at high levels around the world for financial liberalisation, including promoting low tax zones.