Opinion: The Tories wants to weaponize foreign aid now?

The government department responsible for overseas aid is to be merged with the Foreign Office (FCO), the BBC understands. The move to combine the Department for International Development (DFID) and the FCO follows a review into UK aid spending by crossbench peer Lord Bew. Boris Johnson is expected to confirm the move, long mooted in Conservative circles, in the Commons later” (BBC.com – ‘International development and Foreign Office to merge’ 16.06.2020).

If your thinking the Little Britain is getting better on the world stage with the Tories in power. This sort of move is directly weaponizing foreign aid grants. Instead of having a separate department working on own terms to actually develop and make a difference. That is, if the ideal is to bring a change and making a difference.

This from the party that still clings on top the dreams and ideals of the greatness of the British Empire. An empire that is long gone and the powers of the United Kingdom has already dwindled. They will be even more weaken and lack soft powers internationally when they are finally left the European Union (EU).

The move is to replicate the Secretary of State in the United States. They are copying the mismanaged militarized state supported development schemes of the United States. That is not a good look. Especially, if the UK want to be serious actor on the world stage and look sincere in their motives. However this paradigm will be more of the political motivations at home and bring brownie points to the current leadership. Then actually make a change.

I don’t see any positive out of this, than they will make political moves instead of actually do what its supposed to do. We already knows there are strings to it and reasons for the development projects and aid. No money is free money, if you believe that. Then your lying to yourself and accepting money from someone. There will be something you need to do. If that is being accountable, prove the recites and that it actually was spent on intended projects. Hitting a set of goals and reach a set amount of people so the foreign donors can tell their tax-payers that it was worth giving this money away.

This is something we all know. If not … we are lying to ourselves and thinking the monies are giving away with naive intentions and can be used on ghosts without any fuzz. If it was so, then the donors would quit quickly and be hostile to continue the practice. There is a reason for certain measures and conditions for taking the aid and grants.

The DFID incorporated into the Foreign Office will only turn every move more political and the ambition of it will change. It will depend on whose in office and who is running the Foreign Office. That means the objectives will turn and will be what is benefiting foreign policy agenda. It will be more business oriented and towards the goals of the current leadership. Instead of being a supposed a long-term development tool in the world. It is not perfect, but at least have had some results and some positive use of its currency.

Now we can expect more political ambition behind the grants and the aid. It will be fitting with the additional pressure of the foreign office, instead of the concern of development or actually making a difference. Expect they will invest in a lot white elephants and waste as it fits the political agenda more than what is actually needed in the nation they are spending funds on.

That is my estimation of it. As well as they scrap a lot of projects, a lot of programs and participation as its not positive politically back-home. Even if it does something positive where these things are actually running day-to-day. Peace.

Press Release: Kenya must review Double Tax Agreement with Mauritius (02.11.2015)

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(Nairobi, November 2, 2015) – Kenya is teetering on the brink of financial meltdown with the implosion of at least two private commercial banks in the last few months and signing of loophole-ridden double taxation agreements with tax havens Mauritius, United Arab Emirates and Qatar.

Tax havens are countries or states that position themselves as low tax jurisdictions allowing companies and rich individuals to hide their wealth without paying appropriate taxes where they actually make their profits or wealth. Tax Justice Network-Africa (TJN-A) in October 2014 sued the Government of Kenya (specifically the Cabinet Secretary to the Treasury, Kenya Revenue Authority and the Attorney-General) challenging the constitutionality of the Kenya/Mauritius Double Taxation Avoidance Agreement signed in Port Louis, Mauritius on May 11, 2012 and as contained in Legal Notice 59 published in the Kenya Gazette of May 23, 2014.

The Agreement significantly undermines Kenya’s ability to raise domestic revenue to underpin the country’s development by opening up loopholes for multinational companies operating in the country and super- rich individuals to shift profits abroad through Mauritius to avoid paying appropriate taxes. For example, provisions under Article 11 of the Agreement relating to interest limit Kenya’s withholding tax to 10 per cent whereas the Kenyan domestic rate currently stands at 15 per cent. This will significantly affect the tax base of the Kenya Revenue Authority (KRA). The Agreement also sharply contravenes Articles 10 and 201 of the Constitution and is inconsistent with the principles of good governance, sustainability and accountability. The Agreement is open to abuse and this could endanger the growth and development of Kenya.

Three main reliefs sought by TJN-A are: that the High Court declares the government’s failure or neglect to subject the Kenya-Mauritius Double Taxation Avoidance Agreement to ratification in line with the Treaty Making and Ratification Act 2012 as a contravention of Articles 10 (a), (c) and (d) and 201 of the Constitution of Kenya.

That the Court directs the Cabinet Secretary for Treasury to immediately withdraw Legal Notice 59 of 2014 and commence the process of ratification in conformity with the provisions of the Treaty Making and Ratification Act 2012.  And award cost of the petition with interest against the Government of Kenya. The case came up for mention at the Nairobi High Court today, November 2, 2015. The court will fix a date for hearing the case on November 9, 2015. Speaking at a press briefing earlier today, the Executive Director of TJN-A, Alvin Mosioma said “there is need for public participation in the process of ratification of double tax agreements…double tax agreements kill the competitive edge of local firms”. 2 Senator Hassan Omar of Mombasa County who also addressed the press said Kenya’s “Parliament needs to appreciate its responsibility in safeguarding the public’s interests,” adding that “the reason people steal is because there is complicity and people are aware of it”. Provisions under Article 12 of the Agreement which relates to royalties also restrict at- source withholding tax to half (10 per cent) of Kenya domestic rate of 20 per cent. This will significantly weaken Kenya’s ability to raise revenue to finance its development. Additionally provisions under Article 20 of the Agreement reserves all taxation of “other income” not dealt with in specific Articles to the residence state.

This effectively reduces withholding tax to zero per cent on services, management fees, insurance commissions among others, whereas Kenyan domestic withholding tax rate currently stands at 20 per cent. This is a major gap that will lead to massive revenue leakages. The Agreement is neither United Nations nor OECD compliant and it also fails to address the issue of disposal of shares in companies. The Agreement effectively reserves under Article 13.4 all taxation of capital gains from selling shares in companies to Mauritius where the effective Capital Gains Tax is zero per cent. Under the Agreement foreign investors in Kenya can acquire Kenyan companies through Mauritius holding companies and Kenya cannot tax any of the gains when they sell these businesses again. This is open to abuse. Similarly, domestic Kenyan investors can dodge Kenyan taxes by round-tripping their investments illicitly through Mauritian shell companies. Kenyan companies can also easily avoid Kenyan taxes in dividends paid to foreign investors through devices like share buy-backs therefore deny the government of development funds.

The provision is very similar to the Capital Gains Tax Article in the India-Mauritius treaty which has proved very controversial costing India an estimated US$600 million a year in revenues as a result of tax avoidance and illicit round-tripping by Indian business executives driving the Government of India to initiate steps to renegotiate its agreement with Mauritius. Under the definition of ‘bilateral treaty’ in Section 2 of the Treaty Making and Ratification Act an ‘agreement’ such as the one between Kenya and Mauritius and which is the subject matter of this legal case, is a treaty subject to the Act and therefore requires that the Cabinet Secretary to the Treasury in consultation with the Attorney General, submit to the Cabinet the treaty, together with a memorandum outlining, inter alia – 1. Policy and legislative considerations, 2. Financial implications 3. Implications on matters relating to counties, 4. The views of the public on the ratification of the treaty.

Mauritius presently has tax treaties with 13 African countries namely Botswana, Lesotho, Madagascar, Mozambique, Namibia, Rwanda, Senegal, Seychelles, Swaziland, South Africa, Tunisia, Uganda and Zimbabwe. Apart from Kenya, Mauritius also has signed Double Taxation Agreements with Congo, Zambia and Nigeria. Currently Mauritius is negotiating DTAs with Algeria, Burkina Faso, Egypt, Gabon, Ghana, Malawi and Tanzania. Unlike Mauritius’ DTA with Uganda and Nigeria, for example, which have specific provisions for withholding tax for management/technical services fees, Kenya failed to negotiate any such provisions. 

In a related development, the Government of Kenya has signed an equally harmful Double Tax Agreement with United Arab Emirates and Qatar – both of which are tax havens – in which Kenya further deems its right to tax as unnecessary in a bid to attract investment from these two countries. These agreements will deepen Kenya’s current cash crunch by allowing the further erosion of the country’s tax base. – END.

ABOUT TJN-A: Tax Justice Network-Africa (TJN-A) is a Pan-African initiative and a member of the Global Alliance for Tax Justice. It is a network of 29 members in 16 African countries. TJN-A collaborates closely with these member organisations in tax justice 3 advocacy at the national and regional levels. TJN-A seeks to promote socially just and progressive taxation systems in Africa, advocating for pro-poor tax policies and the strengthening of tax systems to promote domestic resource mobilisation. TJN-A aims to challenge harmful tax policies and practices that favour the wealthy and aggravate and perpetuate inequality. For further enquiries, please email Kwesi Obeng at kobeng@taxjusticeafrica.net (+254 726 804 400) and/or Michelle Mbuthia at mmbuthia@taxjusticeafrica.net (+254 724 994 796).