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The East African : Nov 10th 2014
The EastAfrican BUSINESS NOVEMBER 8-14,2014 DEALING WITH TAX EVASION Kenya to sign convention that curbs tax fraud The ag≥eement will help in ≥evealing names of tax evade≥s and make it easie≥ fo≥ the gove≥nment to pu≥sue them By JEFF OTIENO The EastAfrican K enya plans to pursue individuals who use offshore companies to evade taxes and commit other economic crimes, after the government announced it will endorse an international convention that targets such offenders. The government said the deci- sion to sign the Organisation for Economic Co-operation and Development (OECD)-Council of Europe Multilateral Convention on Mutual Administrative Assistance in Tax Matters is aimed at promoting transparency in tax matters. The announcement was made at the recent 7th meeting of the Global Forum on Transparency and Exchange of Information for Purposes held in Berlin. The meeting sanctioned the inclusion in the terms of reference of a requirement for tax authorities to maintain beneficial ownership information. Kenya Revenue Authority Com- missioner-General John Njiraini was among the officials who represented government in the meeting. Keeping records “The convention facilitates in- ternational co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers,” Mr Njiraini said. Keeping records of who holds beneficial interest would lift the veil on shadowy figures behind cross-owned companies that abet tax evasion and illicit activities like drug and human trafficking. A statement from the KRA said Finance Cabinet Secretary Henry Rotich has pledged to sign the convention. The Convention will not on- ly make it possible to reveal the names of tax evaders, but also make it easier for the government to pursue them within and outside the country. The agreement is the most com- prehensive multilateral instrument available for all forms of co-operation to tackle tax evasion and avoidance. Exchange of information Mr Njiraini said Kenya has joined a continental initiative designed to create awareness among African states on the benefits of the current international co-operation on the exchange of information that would help governments to collect revenue domestically. Kenya has in the past found it difficult to pursue offshore companies accused of involvement in questionable deals. In addition, getting information on the real owners of some holding companies doing business in the country has been difficult. A case in point that caused con- troversy a few years ago is the ownership of Mobitelea Ventures, a company that previously owned 12.5 per cent of Vodafone Kenya Ltd, a 40 per cent shareholder of Kenya Revenue Authority Commissioner-General John Njiraini (left) explains how the mobile iTax system works to a taxpayer, Fridah Sigilai. Kenya plans to sign an international convention that curbs tax evasion. Picture: File WHY IT IS IMPORTANT More than 60 countries have signed the convention, which has been extended to more than 10 jurisdictions, including the Cayman Islands, Isle of Man, Guernsey and Jersey, where many offshore companies are registered. Kenya’s largest mobile company Safaricom. In 2007, an investigation by a parliamentary committee failed to establish whether the Guernsey registered company’s owners included local politicians who may have used their influence to According to the Kenya Revenue Authority, the agreement allows countries to exchange information relevant to the administration of tax laws as well as prosecute tax offences. facilitate Vodafone’s original $20 million investment in Safaricom in 2000. At the time, Vodafone refused a formal request from the parliamentary committee to reveal who owned Mobitelea, insisting that the company was its chosen partner in Kenya. New ≥ules fo≥ chilli expo≥ts afte≥ pest attack By ISAAC KHISA The EastAfrican UGANDA HAS introduced new rules for chilli exporters as it seeks to save the fresh produce sub-sector, now threatened by substandard inputs. Authorities suspended exports of hot chilli to the European Union a fortnight ago following a widespread infestation of the crop by the codling moth. Farmers blamed counterfeit pesticides, with exporters saying the country’s fresh produce is often intercepted by EU health inspectors. The codling moth is a pest that lays its eggs on the fruit or leaves of the hot chilli trees, and the larvae burrow into the fruit. Okaasai Opolot, director for crop resources at the Ministry of Agriculture said that exporters are now required to register with both the Agriculture and Trade Ministries, to ensure good hygiene in their packing yards, and arrange for cold trucks for transportation of the produce. “The exporters should also call agronomists and inspectors to their farms and packing yards to ensure that the produce meant for export meets the required phytosanitary standards,” he said. Mr Opolot said chilli for export will no longer be inspected at the airport but at the exporter’s packing yard and later verified at the country’s exit points. Farmers are also required to register with the two ministries to help establish the acreage under chilli in the country. “We are training farmers in how to manage their farms so that we can eliminate this pest.” James Kanyije, CEO KK Foods Ltd “Whoever fails to comply with these guide- lines will not export chilli,” Mr Opolot warned. Ugandan chilli traders have not been fol- lowing any guidelines, with some transporting their produce to the airport on motorcycles. Before the suspension, Uganda’s KK Foods and Icemark Africa Ltd were exporting a combined 32 tonnes of chilli per week to the EU and the Middle East, earning farmers Ush64 million ($23,280) weekly, at the current market price of Ush2,000 ($0.72) per kilogramme. Currently, Uganda has 26 chilli exporting firms, with more than 1,000 farmers, according to the Agriculture Ministry. Data from the Uganda Bureau of Statistics indicates that the country’s chilli exports have grown 26.6 per cent since 2009 to 405,000 tonnes in 2013. Chilli export earnings have increased from $617,000 in 2009 to $1.71 million in 2013, driven by increased production and high demand in the European market. 45 Da≥, Kenya to link thei≥ powe≥ g≥ids By ROSEMARY MIRONDO Special Correspondent TANZANIA IS planning to construct a 400kV power transmission line that will interconnect its national power grid with Kenya’s. The transmission line will start from Namanga to Singida through Arusha and Manyara up to Isinya in Kenya. Project manager Khalid James said the project will cost Tanzania Tsh379.9 billion ($228 million). The project will interconnect Zambia, Tanzania and Kenya. “The interconnection with Kenya will help deal with power fluctuations. When we have excess power we can supply Kenya and vice versa,” he said. Construction is expected to begin in the first quarter of 2015 and end in 2016. The plan also involves upgrad- ing the Singida substation to 400kV and supply electricity to villages along the transmission line. Mr James said the project will also increase transit capacities and flexibility of operation, improve electricity supply in Tanzania, Kenya and the East African and South African Power Pools (EAPP and SAPP). He added that the project will help improve the reliability and quality of power supply and enhance economic and social development in the region. D≥aft law on oil, gas By KENNEDY SENELWA Special Correspondent KENYA HAS drafted a Bill to establish an independent regulator to oversee exploration and production of crude oil with natural gas. The Petroleum Exploration and Production Bill, 2014 proposes the establishment of an Upstream Petroleum Regulatory Authority (Upra) and competitive tendering of exploration blocks. Energy Principal Secretary Joseph Njoroge said the law will be used by the government and prospecting companies to negotiate future exploration agreements. Communities living in blocks with hydrocarbons will receive 5 per cent of the revenue while the county government gets 20 per cent. The state will retain 75 per cent of the money once production starts. The Bill was prepared by a technical committee of Ministry of Energy after reviewing the Petroleum Exploration and Production Act of 1986, which lacks terms for exploration of natural gas.
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