Is Kenya being shaped to be Africa’s new tax haven?

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. If successful, this hub will be a key mechanism to extract wealth from some of the world's poorest countries.

Until now, there has not 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 it Barclays' attempts 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 reportedly 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; inequality and poverty are far too high. Its progress, once the pride of Africa, has taken a severe hit in the past decade thanks to a noxious mix of bad weather, in the form of severe droughts, and bad politics, for example, the deadly violence surrounding the 2007 election. With over just under half of the population below the poverty line, and growth rates well below the continental average, becoming an "International Financial Centre" might sound like a sensible idea. But hang on, what does being "International Financial Centre" actually mean?

When speaking to business insiders, the Kenyan authorities are clear. Alex Owino, a project manager at the 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." And on their inspiration: "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?"

Being the midwife of new tax havens is increasingly a feature of the City of London's offer to the world.

And then there is the very 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 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 our /The Rules, are running a campaign right now to try and stop the imposition of a staggering 16 percent increase in a tax on staple foods such as milk, maize and other basic necessities. They rightly object to huge tax increases on the poorest while corporate tax exemptions and theft are costing the country $1.1bn 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 are 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 greed has no limits.

Adapted from Aljazeera.

Posted in: Business News