Kenya-Mauritius Tax Agreement: TJNA Wins Case

In a win for tax justice campaigners in ensuring transparency in bilateral tax treaties, a Double Tax Avoidance Agreement (DTAA) in existence between Kenya and Mauritius was voided and declared unconstitutional by a Kenyan Court on March 14, 2019.

The ruling came after a long court battle between a not-for-profit organization, Tax Justice Network Africa (TJNA), a partner with Oxfam Pan Africa Programme, and the Government of Kenya.

Revenue leakage

Double taxation occurs when a tax is imposed more than once on the same asset, income stream, or transaction but it can also occur if two or more countries assume jurisdiction over the same asset, income, or transaction. This form of double taxation is often solved by tax treaties between countries. Double tax avoidance agreement treaties can lead to revenue leakage.

Collecting tax is one of the key means by which governments are able to address poverty and inequality. Big business is dodging tax on an industrial scale, depriving governments across the globe of the money they need to address poverty and invest in healthcare, education and jobs.

“This ruling is welcome especially as our capacity to impose and collect a fair share of taxes from multi-nationals and individuals is limited and bilateral economic treaty making processes more often lack the voices of the people” Joab Okanda, Oxfam Pan Africa Programme Financing for Development & Inequality Advisor said. “It is my expectation that there will be snowball effect on other peers on the continent hence sealing loopholes that facilitate tax avoidance and evasion. This means we will have more revenue to invest in community boreholes hence our women and girls will no longer have to walk 20 kilometres to get 20 litres of water for family use”.

Illicit financial flows

Double tax Avoidance Agreements in Africa facilitate illicit financial flows from Africa allowing aggressive tax planning and serving as channels for tax avoidance by Multi-National Companies and individuals. They are used by foreign businesses to ensure that they pay minimal tax contributions in jurisdictions where they generate profits. This denies African governments the much-needed revenue to finance accessible, quality and gender responsive public services.

The ruling is a significant step towards promoting a financing architecture that enhances and effectively eliminates illicit financial flows, corruption, and promotes domestic resource mobilization that will progressively eliminate dependence on external aid.

Reacting to the ruling, Alvin Mosioma, the Executive Director of TJNA said that the ruling is ground breaking not just for Kenya but other African countries”. “We welcome this ruling as a validation of our argument that requires all DTAA’s to be subject to the constitutionally required ratification process as enshrined on Articles 10 (a to c) and 201 of the Constitution of Kenya. The ruling is a first step in the right direction in ensuring proper and wider stakeholder consultations on matters of national interest”.

Oxfam's Intervention

Oxfam Pan Africa Programme works with others to promote an African finance architecture that enhances and tackles the adverse effects caused by illicit financial flows, corruption and inequality. The programming builds capacity for countries to reduce dependence on external aid, promote domestic resource mobilization, stop conflict financing, improve natural resource governance, empower women economically and progressively achieve Agenda 2063. Change among other interventions, is delivered by undertaking active Policy Research on domestic resource mobilization and curbing illicit financial flows to strengthen national public finance reforms including tax systems and also by expanding Tax Justice and accountability campaigns