Nairobi, KENYA: Tax Justice Network Africa TJN-A is against the passing of the Aden Duale’s Nairobi International Financial Centre Bill into law, citing that this would make Kenya lose out on its economic revenues.
Jason Braganza, Deputy Executive Director, TJN-A, told Baraka FM that when passed into law the Majority Leaders Bill would create a tax haven in the city of Nairobi and allow big financial corporations to operate under low supervision and poor transparency.
The 2016 proposed International Financial Centre Bill proposes that Multinational Corporations be allowed to work in a high secrecy environment.
“They will operate under the environment that encourages a system of tax incentive promotion, tax holidays and tax breaks, “Mr. Braganza said.
Speaking exclusively to Baraka FM on Monday, he added that this is not necessarily good for Kenya because tax incentives do not promote or enhance economic growth and sustainability.
If we start operating as a tax haven it is very clear that we will be hosting individuals and corporations involved in illegal activity.
He added that Tax evasion which is illegal in many countries, would then be rampant.
”We are not against this Bill but we believe Kenya is not at the right stage of implementing this, because of the challenges that come by when setting up a financial centre. It may facilitate issues of financial crime, corruption and tax evasion,” said Jared Maranga, the Policy lead in charge of the Tax and Investments programme at TJN-A.
With reference to the 2015 Illicit Financial Flows Report from the High Level Panel, Africa alone is losing $ 50 billion a year because of tax
evasion and illegal financial flows.
TJN-A also carried out research on the review of the impact of tax incentives and findings showed that Kenya is losing $1 million per annum because of the incentives.
Nairobi International Financial Centre is primarily targeting the financial services sector which in Kenya is relatively small but growing.
It is a sector that has very little returns in terms of generating wealth incomes for the mass.
“At this moment in time it is a bad idea, to some extent misguided by economic redundant thinking,” Mr. Braganza noted.
”Politically it is meant to continue the current state of affairs where the benefits are left to accrue just to a small group of powerful
individuals,” he added.
Mr. Braganza emphasized that the Foreign Direct Investment associated with this proposal is that it would not lead to high mass employment creation and it would benefit a small number of qualified well educated accountants
and financial advisors.
Financial institutions have mentioned the tax incentives being one of the reasons that Kenya Revenue Authority KRA does not reach its targets during collections.
“KRA missing its targets is a contribution of many other factors and tax incentives is one of them. Illicit financial flows is another reason which comes in through corruption,” Mr. Maranga said.
Mr. Braganza added that having a financial centre would mean Kenya hosting countries that avoid tax which means they would cheat governments where they are operating, thereby harming other countries efforts to raise tax
revenues for their development projects.
“The solution to this is reviewing our income tax legislation, the types of incentives we are extending. We must make sure that we are able to make an assessment, a cost-benefit analysis to make sure that the kind of incentives we are granting are going to translate to the benefits being looked for,” Mr. Maranga concluded.
Noteworthy, also is that the proposed legislation seeks to create a legal framework that would facilitate and support the development of an
efficient and globally competitive financial services sector.