The committee on fiscal studies (CFS) hosted tax talk on Wednesday 3rd November 2021 to explore the linkages between debt international financial obligations and human rights

The speaker for the day was Prof. Attiya Waris who presented a report to the General Assembly late last month on debt architecture. Prof. Waris noted that we have to rethink on the debt architecture. Different economies over the past two years have collapsed, reemerged, others have woken up and become stronger and yet others have completely fallen apart. The system is really shaken and people cannot pay debt. The national economy is also struggling because the people that would work and pay taxes, then pay off the foreign debt have disappeared. And so we have to rethink about the debt architecture. There is also the need to have more conversations to ensure that fiscal systems are responsive to the needs of the people. Illicit financial flows are part of the architecture of the problem that allows money to leave an economy without being monitored.

On matters of offshore accounts, she noted that keeping money in an account not in the country that you reside is not a bad thing. It is a strategy of investment in that; you keep some of the money in the country of residence and some in an offshore account. She however noted that every country has laws on what you can/cannot do with the offshore account for example many countries, public or civil servants are not allowed to have offshore accounts as part of patriotism and trust faith to the state. To encourage people to invest and save in the country of residence, there is need to ensure the economy is stable and legal systems are robust and fiscally legitimate. All these principals have to be very strong for people to be willing to keep the money in the country.

Professor Waris also spoke candidly on fiscal architecture and tax body.  She noted there have been calls on the need to set up intergovernmental tax body. The system is messy globally and it is not working. Regional blocks across the world have come together and banded for their purposes because they have lot of similarities for example The European Union and the African Union. These blocks come together because of geography but the whole purpose of coming together is because there is a lot of a shared similarity about being in the same geographical region. The unified states are able to come make decisions as a block and the decisions tend to be much stronger because have the buy of a huge group of countries. Blocks are very useful however, the power dynamic in the world are quite unfortunate and it ties a lot with the history of taxation. The model double taxation agreement was developed in the 50’s and 60s’ and many African countries were not independent, they were colonies of an imperial state that was making decisions on their behalf within those treaties and conventions. After independence most African countries adopted the agreements.

Developing countries are scrambling to catch up. “We need a world that creates space for people to think differently and give different options but that space is not there. So anytime you want to talk about tax and tax treaty’s one has to reference the United Nations or the Organization for Economic Co-operation and Development  (OECD) models yet there are other models but the space to speak and discuss about those other models is not there” Prof. Waris noted.

The Professor also spoke on the relation between foreign debt and human rights. She noted foreign debt is important because it is a huge amount of money. In some countries every child is born with a huge debt but there are others where for every child born he/ she is a millionaire. This is because of how they manage their foreign debt, and how they invest their assets. In Kenya there is the road network being developed which is a fantastic decision for a foreign debt. These infrastructure debts help to jumpstart an economy. The civil and political rights that come with the ability to move faster, easier and quicker because of the infrastructure helps with the right to movement and it allows you more association. These are rights that start to come about with foreign debt related investments if they are done strategically.

Prof Waris also touched on overtaxing which is a controversial phrase. There are 19.5 million registered Kenyans to vote but 7 million registered for tax. “There is no over taxation in Kenya when it comes to income tax”. She said.  Every person should pay income tax with the fairness of their ability to pay. When the system is not bolstered and it is not strong enough then the government is always looking for alternative ways to add income and they are go straight to VAT. This is causing more problems because moving into an African continent, without borders and free trade agreements. This means countries are going to have zero customs duty so governments will have no or very little revenue out of it so they go for VAT or income tax.

Prof. Waris encouraged on the need for access to information especially financial information. She noted that she has presented a report that states specifically that there should be a debt freezing and  interest freezing. There are ethical debts where there are no interests’ rates.  Countries need to use and adopt these alternative fiscal systems or debt systems which will have no interest rate at all. States that have good relations should be allowed to have such systems in place.

In conclusion, Prof. Waris spoke on minimum tax deal by OECD and the implications to developing countries. She noted she was happy Kenya and Nigeria are not part of it. "It is a very dangerous thing to have a minimum tax because it takes tax sovereignty from a state because there will be no equality, or proportionality and equity". she said

She further noted There are many laws that can be put in place that allow people to suffer less like food stamp where citizens get food in exchange of stamps. During Covid 19 there was a cash transfer system which helped a lot of people. There must be constant reflection on policies on how to make peoples better and how to look after the vulnerable in the society. But policies must be pro-poor and human rights are a really good tool to have a pro-poor policy that reduces those that are living on poverty levels.

The tax talk is part of the monthly tax talks that are hosted by the committee on fiscal  studies which is part of the university of Nairobi’s premier research department producing and leading on scholarship training and practice on fiscal law and policy issues in Africa and also beyond. Cfs.uonbi.ac.ke