Is Kenya Being Shaped Into Africa’s Flagship Tax Haven?

They do this as part of their objectives to promote UK financial services, presumably because UK financial services benefit from more low and no tax zones by virtue of their role as “the world’s biggest financial centre”.

In other words, financial liberalisation and tax havens are good for the UK’s finance-driven businesses.

Then there’s what insiders have said about the intent of the bankers in the City of London. In evidence to a British Parliamentary inquiry earlier this year, two very senior former bankers said this:

Witness 2: The UK does not have [withholding tax]. Hence it is mainly arbitrage on other people’s tax systems. I am not saying that this is a good thing, I am just saying it is not in the UK. [emphasis added]

Witness 1: That’s an important point. What you are seeing, and what is left is, exporting the avoidance. They may be sitting in London, but they are exploiting other countries’ tax regimes.

From the UK’s point of view, you might see that things have gone fairly quiet. Whether or not that will be the case, the key is that while these people are very creative, and the good tax structures are still there, the business always has the capability to come back. [emphasis added]

They gave their testimony anonymously, for reasons we can surely guess, but we do know that Witness 1 is a former employee in Structured Capital Markets at Barclays, and Witness 2 was Head of Debt Structuring Group at “Bank A”.

And finally there’s the high level attention the City of London has been paying Kenya recently. Successive Lord Mayors of London – the Lobbyists in Chief of the City’s financial interests – have been in and out of the country rather a lot.

Despite Kenya being just one of 43 countries in one of 50 Market Advisory Groups run by the City, it has received personal visits from Lord Mayors in 2011, 2012, and 2013.

This should be a source of intense embarrassment to UK Prime Minister David Cameron as he uses his G8 pulpit this month to present the rich world’s prescription for tackling tax evasion.

Can people in the developing world have much faith in the man who not only presides over the tax haven capital of the world, but who goes to fight for the City of London on matters of taxation far more than he has ever challenged it?

Some people in Kenya are alert to the dangers. Activist groups including ours, /The Rules, are running a campaign right now to try to stop the imposition of a staggering 16% tax increase on staple foods such as milk, maize and other basic necessities.

They rightly object to high tax increases on the poorest while corporate tax exemptions and theft are costing the country $1.1 billion a year.

They see this as a portentous step along the path to reorienting Kenya’s tax regime – a path they have good reason to believe is leading inexorably to Kenya becoming Africa’s flagship tax haven.

If they’re right, even more power, and Kenya’s future prosperity, will rest in the hands of the global financial elite – the very same elite who caused the global financial crisis and have proven at every turn that their interests are at odds with those of the majority.

 

Martin Kirk was reporting from New York, Blessol Gathani from Nairobi.

Martin is the Global Campaigns Director at /The Rules and has worked extensively across private, public and NGO sector on government relations and engaging the public on global issues.

Blessol Gathoni is a freelance journalist based in Kenya.