WANYAMA: Parliament has a chance to bolster tax justice

In the State of the Nation address on Thursday, President Kenyatta vowed to continue the war on corruption.

This would ensure development and justice by protecting public resources from mismanagement and plunder.

Prior to the speech, he President had made a strongly-worded statement that rich Kenyans, whose lifestyles do not reflect their tax returns, should disclose their sources of wealth.

Both statements point to growing inclinations by the national government to work towards tax justice in collaboration with other ongoing initiatives such as anti-corruption, anti-money laundering and counter-terrorism financing.

Tax justice involves efforts to address inequality within the regimes of revenue collection, allocation, expenditure and management of taxes.

It is among many forms of development policy research and advocacy for the achievement of Sustainable Development Goals (SDGs) helping to bridge the gap between the rich and poor.

It also aims at championing self-sufficiency by attaining effective domestic revenue mobilisation and stopping the bleeding of resources from countries through prevention of illicit financial flows to tax havens, mainly in Europe.

Proceeds of crime such as tax evasion are laundered in various ways. But the illegal activities are not the only ways in which countries are stifled.

Legal means of tax avoidance result in the emergence of a system that burdens the underprivileged more than high net worth individuals who use their influence or resources to manipulate revenue systems in their favour at the expense of the common good aspired to by the tenets of the Constitution.

This allows entities, mainly wealthy individuals, companies and multinational corporations, to insulate themselves by tax dodging, leaving the government dependent on external financing such as development aid or loans.

Of late, Parliament has not performed well in pursuit of tax justice. The passage of the 2018/2019 budget exposed a tendency for regressive taxation that burdens the poor.

Secondly, the National Assembly’s amendment to the Tax Procedures Act 2015 weakened financial reporting, investigations and surveillance mechanisms of the Financial Reporting Centre, Central Bank Kenya and other regulators using the Finance Act 2018.

This exempted any money remitted from a foreign country, under the guise of amnesty, from the Proceeds of Crime and Anti-Money Laundering Act 2009 (Pocamla).

Lastly, CBK Governor Patrick Njoroge had to fight back a legislative attempt at further weakening administrative protections against laundering.

Indeed, it has not taken long for countries at the heart of the world financial order such as the United States to identify Kenya as a global hotspot for money laundering due to the deficiencies in regulating the circulation of dirty money.

The Senate and National Assembly should take this golden opportunity to reverse current harmful legislations within Kenya’s tax code, review the tax system, which benefits the rich at the expense of the poor, and engage civil society and the private sector, who are working towards fair taxation.

Mr Wanyama is coordinator of the East Africa Tax and Governance Network (EATGN). [email protected]