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THE TEAMPresident of the General Assembly: Ms. Tanya Maringo

COMMITTEE ONEVice President of the General Assembly: Ms. Ndunge Wambua

Committee Chair: Ms. Lynn Kinyanjui

Committee Secretary: Mr. Eddie Iragi

COMMITTEE TWOCOMMITTEE CHAIR: Ms. Maryanne Kamau

Committee Co-Chair: Ms. Katerina Msafari

Committee Secretary: Mr. Tom Ndambuki

COMMITTEE THREECommittee Chair: Ms. Jacquline Mwangi

Committee Co-Chair: Ms. Doreen Banda

Committee Secretary: Ms. Stephanie Okeyo

COMMITTEE FOURCommittee Chair: Ms. Judie Ombuor

Committee Co-Chair: Mr. Ken Tanui

Committee Secretary: Mr. Ian Githinji

ECOSOCVice President of the Economic & Social Council: Mr. Brian Kamau

Committee Chair: Ms. Michelle Njoki

Committee Secretary: Ms. Stella Kariuki

SECURITY COUNCILMr. Yussuf Kimtai

ConfErEnCE 2014 DirECTor GEnErAls:

This week’s thought - Personal Finance“A simple fact that is hard to learn is that the time to save money is when

you have some.”

Joe Moore

4

F E AT U R E S T O RY

With Special Focus onTax Havens

T h E Q U E S T i O n O F

TAXi m p R O p R i E T Y

Tax non-compliance is basically composed of tax evasion and tax

avoidance. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability while Tax avoidance is the legal usage of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law.

The Economist has tentatively adopted a fairly simple description of a tax haven by Geoffrey Colin Powell “What ... identifies

an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance.” According to the Economics Intelligence unit the world has about 50-60 active tax havens, mostly clustered in the Caribbean, parts of the United States , Europe, South-East Asia and the Indian and Pacific oceans. They serve as domicile for more than 2million paper companies, thousands of banks, funds and insurers and at least half of all registered ships above 100 tonnes. The 39th G8 summit was held on 17–18 June 2013 at the Lough Erne Resort, Northern Ireland. Its official theme was, ‘Tax evasion and transparency’ and although the theme was overshadowed by occurrences in Syria the leaders agreed to a series of commitments that are step in the right direction to curb the menace that is tax evasion. One may wonder how tax evasion has acquired such a high profile so as to be the principle focus of the G8 summit as well as the G20 summit which was held on

Written By:Brian Kamau Githinji,Chairperson of the Economics and Finance Committee13th Kenya MUN Session

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F E AT U R E S T O RY

September 2013 in St Petersburg, Russia. The reason is that it has come to light how some of the largest corporations are actively engaging in tax avoidance. Starbucks, for example, had sales of £400m in the UK last year, but paid no corporation tax. It transferred some money to a

Dutch sister company in royalty payments, bought coffee beans from Switzerland and paid high interest rates to borrow from other parts of the business . Please note that all this is legal as it is tax avoidance and not evasion. However the resulting public outcry from a majority of people

who believed that the company was cheating lead to the company declaring that they decided to forgo certain deductions and will now be liable to pay 10 million pounds ($15.4 million) in corporation tax this year and a further GBP10 million in 2014 .

L i n k i ng Ta x i m p ro p r i e t y w i t h C o r r u p t i o n

It is common knowledge in business that every market has a demand and supply

side. In the case of corruption; the demand side involves those who would practice corruption while the supply side includes those who offer, provide and facilitate corruption opportunities. Tax havens facilitate corruption opportunities by supply of services, which includes: supplying secrecy through offshore shell companies, offshore trusts and similar subterfuges. This actually stimulates the demand side, by offering protection from discovery. It is also important to note that

we live in a globalized world where one country’s secrecy and tax haven policies harm other countries. It is very concerning to note that many of the world’s big developmental institutions have a very narrow perspective of corruption that completely ignores the role of the offshore financial systems in facilitating tax evasion. Secrecy and corruption are symbiotic; tax havens, by offering secrecy, foster corruption and must be brought to the centre of the corruption debate. The World Bank defines corruption as ‘the abuse of public

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F E AT U R E S T O RY

office for private gain’. This focus on the public sector as the only arena for corruption is not just arbitrary. It is wrong, and indeed pernicious. Transparency International defines corruption as ‘the abuse of entrusted power for private gain .’ While this is a much broader definition it has still been interpreted narrowly. First launched in 1995 the Corruption Perception Index (CPI) as acknowledged by Transparency International has widely been credited with putting the issue of

“I have to challenge some of my own inherited perceptions

that London is safe, Lagos is not. Britain is free of corruption, but Nigeria is not. Much of the corruption stems from London and Washington. Many of the

mechanisms that keep Nigerians poor – the networks of offshore bank accounts that companies use to bleed Nigeria dry of its

profits – are based in tax havens that were set up by the British and other colonial powers.”

Andy Rowell, Changing Perceptions

corruption on the international policy agenda. These outdated tools have skewed our perceptions of the geography of corruption to a terrible degree. The CPI identifies Africa as the most corrupt region of the world, accounting for over half of the ‘most corrupt’ quintile of countries in the 2006 index . A critical examination of the CPI shows over half of the countries ranked in the “least corrupt” quintile of the CPI are offshore tax havens. This goes to show that something is clearly wrong here.

h ow d o e s t h i s a p p l y to Ke n y a?

In its report on how tax havens plunder the poor , ActionAid gives a very interesting view of

Tullow oil. Tullow Oil describes itself as ‘Africa’s leading independent oil company’. Eighty four percent of its sales revenues come from Africa . Yet just four of the 81 companies it lists as subsidiaries in its Companies House filings are registered in African countries (two in South Africa, two in Gabon), and none in low- or lower-middle-income countries. By contrast, over half (47) are registered in tax havens, including the British Virgin Islands, Guernsey, the Isle of Man, Jersey, Ireland, the Netherlands and

St Lucia. 29 of these tax haven companies refer to developing countries in their names, and Tullow discloses that at least 16 actually operate in developing countries while being registered in tax havens: Tullow Bangladesh Limited and Tullow Cote d’Ivoire Limited are registered in Jersey; Tullow Congo Limited in the Isle of Man; and so on. While not in any way suggesting that Tullow oil has evaded tax it is important to note that due to having registered so many of its subsidiaries in tax

havens it would be very difficult if not impossible to trace any financial records of its dealings. And while further noting that in the current legal framework tax avoidance is legal then it is imperative that we ask the question if we shall realise any meaningful revenue from the recent oil discoveries in our country or shall we be left asking ourselves where all the money went? Amidst all this current excitement of the oil discoveries are we doomed to never realise the oil dream?

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F E AT U R E S T O RY

8

S h i L L i n G S A n D S E n S E

Campus is one of the coolest places in the world. The company, the free time, fun,

less responsibility and epitomized personal development. A chit-chat with any fourth year student brings out rays of hope for a better life, of optimism for a good job and a fancy car a few years down the line (I have heard some guys exclaim that they can’t start off with a salary of less than 60k). In as much as it is very good to dream, it is also worth noting that if you are just a dreamer, you might as well get an extra blanket to keep on dreaming. For Eve, leaving campus was, as usual, a moment of joy. She had a degree in Journalism from a premier university in Kenya. She dreamt of getting a job with a top media company and if luck swam with her, to find herself behind the cameras anchoring the news in the sooner than later future. After months of tarmacking and eventually losing hope, she eventually settled for a job as a receptionist with a startup firm, earning cents in the region of 15k, at least she was in a position to meet her contracted monthly bill. Moses was a genius, by every standard. Achieving a first class in an engineering degree is not a minor achievement (even if you cheat in every paper of every exam). Armed with ideas and buzzing with energy, he came into the job market, so rosy such that he belittled some interview invitations. He was certain of landing a big job with a major multinational, drive a nice car,

build a home and the likes. But in the end, nothing went according to plan. Stories with similar flows and endings are told every day, in every corner of the country. It is not only a Kenyan problem. The situation in the Euro zone is even worse. After four years of studying a business management course in Portugal, Coelho finds himself doing a part time job as a receptionist in a hotel in Lisbon, earning 400 pounds a month (that may seem a lot around here, but given the standards of living up there, its little). The question beckons; how does one prepare for the campus aftermath? How should one get ready to pay his or her own bills out there? For someone who lacks the family or friends network to pull up a nice job, how do you stand on your own? How do you swallow that ego and

Surviving the Campus Aftermath

how does one prepare for the

campus aftermath?

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S h i L L i n G S A n D S E n S E

accept to be bossed around by a high school dropout who accumulated savings to start that cab business company where you have landed your first job, getting 15k a month? How do you read the economy and know that times may be hard? I will examine a few factors which we tend to ignore. One evening while reading the celebrated writer, Malcom Gladwell’s book, Outliers, I came across his argument that among factors which contribute to our success, is the time when one is born. For simplicity purposes, I will pull an example of the people born between 1975 and 1985. This is the lucky Kenyan population. They were stepping into maturity when the economy was taking off under Kibaki. Okay, they had troubles here and there in getting their first job, but it is worth noting that with a CPA part 1, one could land a permanent job with a top firm. It only took several steps educating oneself and majority of those people are managers. It was more a case of talent (you can call it expertise) shortage. Couple that with a strong economic expansion and you find a lucky group of guys. Fast forward to 2010/11 when the economy was creeping its way from the effects of the 2008 PEV, global economic meltdown, currency problems, famine and inflation. The firms went silent on hiring, except on

acute need basis. The biggest banks started a rightsizing process (that is what they call sacking of employees nowadays) and the bulk of opportunities were left to be provided by SME’s (these ones, have their problems too). Guys leaving campus at this time had to wait longer for opportunities, and when these opportunities came up, they had to fight harder for them. Can we call that the age curse? The other factor is luck. Now now….luck is what happens when preparation meets opportunity. It is easy to whine after campus that there are no jobs or just sleep the whole day and expect upkeep from parents. There is a bit of personal preparation. Ask yourself, if you meet the HR of a multinational accidentally, then s/he chooses to interview you, will you be ready?

And then the most important factor, personal determination and strength. How are you determined, constructively, to be successful? What is your drive, entrepreneurship or employment? Do you consider yourself a solution guy or a process person? How versatile are you? Accepting

disappointments is also key. How do you deal with missing a chance for a dream job at a multinational by a whisker? Going back to the drawing board is hard, sometimes depressing. You can lose up to a month or so mourning about that lost chance instead of staying up and focusing on new opportunities.

The rule of the game out here is simple, DON’T

GIVE UP. As you remember the times in the

campus cubicle on the digital campus chronicles,

mull it over and up your game. And while you are

at it, ask yourself whether you lack luck or you just

belong to the wrong generation?

S U B S C R i B E F O R F R E E ! !Visi t www.chroniclesmedia.org

11

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