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Kenya-India-Iran-Kuwait-Mauritius-Netherlands-Qatar-Seychelles-South Africa-Korea, Rep of-Untd A Emirates

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Tax Justice Network Africa and Katiba Institute Seek Overturn of 10 Kenyan Tax Treaties

The Tax Justice Network Africa (TJNA) has issued a release announcing that together with the Katiba Institute (KI), it has filed a constitutional petition concerning Kenya's tax treaties (DTAs) with India, Iran, Kuwait, Mauritius, the Netherlands, Qatar, Seychelles, South Africa, South Korea, and the United Arab Emirates. According to a related video from the TJNA, the TJNA and KI are undertaking public interest litigation asking that:

  1. The high court overturns the decisions by Cabinet Secretary (CS) for the Ministry of Finance and National Planning (Treasury) to enter the 10 DTAs;
  2. The high court declare the powers of CS Treasury to enter DTAs unconstitutional;
  3. That the failure of the CS Treasury to subject the DTAs to the ratification process in accordance with the Treatymaking and Ratification Act of 2012 is unconstitutional;
  4. That an order be made directing the CS Treasury to withdraw the legal notices embodying the 10 DTAs; and
  5. That a declaration be made that the legal notices embodying the 10 DTAs are void for failure to comply with the Statutory Instrument Act of 2013 (STA2013) and TMRA2012.

Note that in 2019, Kenya's High Court found that the ratification of Kenya's 2012 tax treaty with Mauritius was unconstitutional, which led to the two sides needing to sign a new tax treaty.

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Civil society takes Government back to court over Kenyan double taxation agreements

Kenya's emerging DTA network has exposed the country by promoting financial secrecy and opacity in the negotiation of treaties, and their linkages to tax havens

24 September 2020 – Tax Justice Network Africa (TJNA) and Katiba Institute (KI), represented by Mr. Yussuf Bashir of Bashir and Noor Advocates, is today filing a constitutional petition at Human Rights Division of the High Court of Kenya at Milimani Law Courts. The petition concerns 10 Double Taxation Agreements (DTAs) signed between Kenya and the following countries, namely: Iran; Kuwait; Seychelles; South Africa; Qatar; Korea; the United Arab Emirates (UAE); India; the Netherlands and Mauritius.

Questions surrounding DTAs need to be urgently addressed in a decisive manner. This is especially the case if one is to consider the recent revelations concerning how Kenyan companies abuse DTAs to avoid paying taxes in the country. For example, recent revelations have alleged how betting giant Sportpesa avoided payment of taxes through the transfer of USD 53 million to the United Kingdom. This was done under the guise of the local subsidiary paying the UK subsidiary for "IT and services" used in its Kenyan operations.

Notably, 4 of the 10 countries cited in the petition (Seychelles, South Africa, Netherlands and Mauritius) are ranked as the most aggressive and extensive tax haven jurisdictions that are used by multinational enterprises to avoid paying tax, thereby eroding revenues of other countries, more so in the developing world. Likewise, the FinCEN files exposé points out how this emerging DTA network is aiding money laundering and other illegal activities that harm the Kenyan economy. Reports of how 53 Kenyan companies and individuals named in a leak of financial records submitted to the US Department of Treasury as having taken part in suspicious financial activity to the tune of an estimated USD 60 Billion should be cause for concern.

TJNA Executive Director Mr Alvin Mosioma stated "If in one exposé you are able to estimate that a country loses KES 6 Trillion, that points to how our knowledge of the problem is just the tip of the iceberg. How much more revenues will we be ablet to collect if we seal these loopholes?" TJNA intends to ensure that in future, similar tax negotiations are not in contravention with the laid down laws and procedures. This is necessary, especially because DTAs entail a restriction on tax sovereignty and have major revenue implications; they grant tax benefits and exemptions to foreign investors not available to Kenyan citizens or companies, resulting in reduction of government revenue.

This petition hopes to make the government reflect on its tax measures and seeks a remedy to current policy implementation of DTAs. Further, the government will initiate DTAs in a transparent manner according to the tenets of the constitution and involve parliament by providing a transparent cost benefit analysis of each DTA for the purposes of decision-making.

TJNA promotes socially- just, accountable, and progressive taxation systems in Africa. It advocates for tax policies with pro-poor outcomes and tax systems that curb public resource leakages and enhance domestic resource mobilisation.

KI promotes knowledge and understanding of Kenya's Constitution and constitutionalism, and to defend and facilitate implementation of the Constitution.

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