Sustainable taxation is key to safeguard Kenya’s and Africa’s future. However, African countries continue to lose billions of dollars in tax revenue annually. Every year African countries lose at least 50 million dollars in taxes — more than the amount of foreign development aid.

This has raised a lot of concern as organizations engage in illegal activities to avoid paying high taxes.

The issue of taxation, corporate governance and development financing is one that needs to be addressed by all stakeholders and appropriate measures enforced and implemented.  At the 21st Nation Leadership Forum aired on June 18, 2020 on NTV themed, "Financing Africa through Sustainable Taxation," a team of expert panelists discussed development financing for Africa, the effect of tax evasion on developing countries, the need to adopt sustainable taxation and measures taken to prevent such losses.

The panelists consisted Prof. Attiya Waris, ag. Deputy Principal, College of Humanities and Social Studies, Director of Research and Enterprises, University of Nairobi, Christine Muthui, Director, Alpha Tax and Business Advisory Services, CPA Maurice Oray, Deputy Commissioner, Corporate Policy at Kenya Revenue Authority and Robert Karanja, is the Regional Lead- Africa, The B Team, Sustainable Business and Social Impact at Safaricom PLC.

“Africa countries have been collecting taxes since independent, but none of them is able to account for them. Across the continent, auditor generals are not getting access to accounts for the current regimes,” says Prof. Waris. “It is important to note that companies in Africa have predominantly declared double digit profits and many of them turn a profit after the first year. African companies have traditionally relied on VAT because it is easy to collect. We have African countries that give preferential tax treatment. In Kenya, we may have administratively decentralized but we did not financially decentralize – this is already causing considerable problems within the various layers of government. Financing a state is not just about tax. There are other ways such as trade, loans, state owned corporations and many more ways. The absence of a tax policy hampers the process of involving citizens in the decision making process, and creating trust between the government and the citizens. Post-pandemic, we cannot benchmark anymore – we need to be innovative. We need to understand our people and our environment not to look at developed countries for solutions to our own problems.”

According to Ms. Muthui, there is need to relook at the emerging tax issues when it comes to investments.

“We should invest in generating sustainable income to drive tax revenues. The informal sector contributes 60 to 80 percent of GDP. The government should invest in this sector to widen the tax base,” said Ms. Muthui. “Unpredictable tax regimes negatively affect investor confidence and the economy. We should be focusing on creating an environment where businesses can thrive. If we do this, businesses and citizens will comply and be encouraged to pay tax.”

CPA Oray addressed the role of policy in inducing sustainable taxation.

“We need to ensure we create a good environment for business and that the government has a good structure to manage its resources. It is not true that we do not have a tax policy – it is just scattered across many volumes. We have reformed the tax laws to ensure they are easy to understand for the citizens. We have also introduced other administrative interventions like digitization of the tax filing process,” he says. “Our tax expenditure is 5 percent of GDP – this is well above the continental average of about 1.5 percent. This means the government's ability to fund its expenditure is handicapped. We should ensure that international tax rules are changed and African countries should work towards domesticating international tax laws. There is great opportunity to enhance our tax policies as a continent. The opportunities are endless.”

According to Mr. Karanja, African countries are competing for direct foreign investment hence the need for collaborative effort to ensure we achieve sustainable taxation.

“It is important for corporate entities to have honest discussions on sustainable tax policies with all stakeholders including tax regulators,” he says. “Corporate entities contribute not just by way of paying taxes but also by fulfilling their social contracts and being responsible corporate citizens.