WILL KENYA BECOME AN OFFSHORE TAX HAVEN?

Following the revelations contained in the multi-millions of documents leaked over the last two years exposing the vast extent of tax avoidance organised through ‘offshore companies’ in Panama, Bermuda, the Cayman Islands, the Channel Islands, Luxembourg and other financial ‘havens’ the question being asked is whether Nairobi is about to join their ranks.

THE NAIROBI INTERNATIONAL FINANCIAL CENTRE

In July President Kenyatta signed into law the establishment of the Nairobi International Financial Centre (NIFC), new tax incentive scheme.

A group claiming to promote ‘just, accountable and progressive taxation systems’, the Tax Justice Network (TJN), have raised concerns that the under the NIFC the Treasury Cabinet Secretary will be able to decide which incentives can be awarded, and presumably to whom.

The TJN allege that the new law could result in a lack of transparency and accountability in Kenya’s tax administration leading to possible abuse.

The TJN says the new tax incentive scheme is modeled on tax havens in other parts of the world, e.g., Panama, Bermuda, the Cayman Islands etc. and could be used for tax avoidance and money laundering.

THE PARADISE PAPERS

In the last few days what are being dubbed the ‘Paradise Papers’ – 13.4 million files hacked from the law firm Appleby, have been in part published by the German newspaper Suddeutsche Zeitung, revealing legal but clandestine offshore financial arrangements used by big companies and very rich individuals to avoid paying tax.

The Suddeutsche Zeitung was also the newspaper that in 2015 published leaked files from the law firm Mossak Fonseca based in Panama. The 11.5 million leaked documents revealed 214,488 ‘offshore entities’ used to avoid tax.

DR SALLY KOSGEI IN PARADISE?

The publication of the Paradise Papers has brought the story offshore entities closer to home.

Dr Sally Kosgei, former Permanent Secretary in the Office of the President, Head of the Civil Service and

Secretary to the Cabinet under President Moi, was revealed in the Panama Papers to have at one time owned a company registered in Mauritius called Zonrisa Limited, which in turn had previously been registered under the name Aisha Limited in the Isle of Man, also a tax haven.

Dr Kosgei also owns Zena Roses Limited in Gatanga, which supplies flowers for export, along with two other flower companies, Zena Asai Farm and Zena Sosiani near Eldoret.

The Paradise Papers show that funds from from a 70-hectare farm owned by Dr Kosgei were used by Aisha Limited to buy an apartment in London at a cost of $1 million (Sh100 million) sometime before April 2001 when she became Cabinet Secretary.

It must be stressed, however, that Sally Kosgei has done nothing illegal in this matter.

She is reported to have told the Consortium of Investigative Journalists (ICIJ), who coordinated the research into the Panama papers, that she bought the apartment to spend more time with her children who were studying in the UK.

Dr Kosgei is also quoted as telling the ICIJ that she had acted on lawyers’ advice and that she had, “satisfied all obligations – legal, professional and ethical – as a public official in Kenya”.