By Antony Mutunga
Kenya occupies position 63 out of 70 jurisdictions globally complicit in helping multinational companies underpay corporate income tax. According to a report by the Tax Justice Network Africa – Corporate Tax Haven Index (CTHI 2021) – the country is responsible for 0.14% of the world’s corporate tax abuse risks.
The study shows that Kenya has a Corporate Tax Haven Index (CTHI) value of 62, which shows that its laws and position in the global economy combine to form a relatively low risk of corporate tax abuse by multinational. The country has a global scale weight of 0.013. The Global Scale weight measures how much financial activity from multinational corporations a jurisdiction hosts.
Kenya’s CTHI value was 62, meaning the country’s laws and position in the global economy combine to form a greater risk of corporate tax abuse by multinational. Mauritius, the leading African enabler country of corporate tax abuse, was assigned a value of 1,013.
Tax Justice Network Africa ranks the countries according to their corporate tax haven index value (CTHI value), haven score and global scale weight.
In terms of haven score, which assesses how much scope of corporate tax abuse the jurisdictions’ tax and financial systems are willing to allow, Kenya received as score of 49.7, a decline from that of 2019 where it had a score of 50.8. This meant that the tax and financial systems have taken measures to reduce corporate tax abuse.
The country had a global scale weight of 0.013% which shows the volume of financial activity conducted in the country by multinational corporations.
According to the State of Tax Justice 2020 report, countries lose a total of over Sh46.9 trillion ($427 billion) in tax each year to international corporate tax abuse and private tax evasion. Kenya loses Sh62.1 billion, which is equivalent to about Sh1,300 per citizen or 4.5% of the country’s tax revenue. A part of the lost taxes, Sh55.1 billion ($502 million), is lost to global tax abuse committed by multinational corporations through manipulation of loopholes in transfer pricing regulations and other leakages.
According to the CTHI 2021 report, British Virgin Islands, Cayman Islands, Bermuda, Netherlands and Switzerland make up the top five corporate tax havens with CTHI shares of 6.4, 6, 5.7, 5.5, and 5.1 respectively. In Africa, Mauritius, South Africa, Seychelles, Botswana and Tanzania made the top five with their rankings of 15, 45, 49, 59 and 65 respectively.