Kenya and other African countries have been urged to monitor and re-evaluate current tax treaties with other nations to seal gaping holes that could facilitate flow of dirty money.
These countries have been challenged to be very keen cost benefits of such arrangement and re-look the conditions binding nations to ascertain their implications on tax revenue.
“Some of these bilateral treaties can be very harmful. Senegal cancelled bilateral ties with Mauritius, a major conduit of illicit financial flow after realising it was losing tax revenue. Other African countries can emulate the same,” said African Center for Tax and Governance, Executive Director, Mustapha Ndajiwo
He spoke during a session on taxation of multinational companies in the ongoing virtual forum for tax justice advocates in Africa, themed, Tax Justice Advocacy: Increasing Participation of Civil Society Organizations (CSOs) and Journalists through Capacity Building .
The training organized by Tax Justice Network (TJN) aims to empower the target groups with skills to identify, track, and report illicit outflows from the continent.
Earlier in the year, Senegal cut its tax treaty ties with Mauritius citing that some key conditions had not been met, according to an ICIJ report published on May 26, 2020.
Senegal alleged that the bilateral treaty had caused the government Sh 25.7 billion ($257m) in lost tax revenue since the agreement was signed in 2002.
On the spotlight also is Mauritius-Kenya tax treaty that was invalidated by Kenya High Court for failing to follow parliamentary procedure during the ratification process.
Tax experts say public participation and consultation should be a top agenda when countries move to review bilateral treaties.
“Alongside conducting cost benefit analysis on potential impact of the treaties, they should go through parliamentary process so that stake holders can scrutinise and add their inputs before they are signed,” said
Maarten Hietland, a researcher and lecturer on corporate tax avoidance by multinational corporations said treaties should be customised to local laws to avoid double taxation that might lead to imposition of more dirty cash being stashed out of the country.
“There has to be a basis or reference to national law .Treaties are about relieving, not imposing tax,” he said.
South Africa and Rwanda initiated talks to renegotiate their tax treaties with Mauritius five years ago.