Civil society groups back Uhuru snub of Biden tax plan

Joe Biden and Uhuru Kenyatta

US President Joe Biden meets with his Kenyan counterpart Uhuru Kenyatta in the Oval Office at the White House in Washington, DC, on October 14, 2021. PHOTO | AFP

Civil society groups have hit out at US President Joe Biden administration’s push for a global minimum rate of tax on multinational companies saying the deal as currently structured will not ensure equity in taxation of multinational firms - a position echoed by President Uhuru Kenyatta’s administration.

The Tax Justice Network, a group campaigning for transparency criticized the Paris-based Organisation for Economic Cooperation and Development (OECD), for failing to live up to the “original ambition” of the plan, and said that the watered down measures mean that only a “sliver of the profits” of multinationals will become taxable, while incentives to shift profits remain sizable.

“It’s no wonder that Ireland and other havens have embraced the deal, especially after obtaining various concessions,” said chief executive Alex Coham in a statement. 

“As it stands, it will neither curb profit shifting effectively, nor provide substantial revenues to more than a handful of OECD member countries. Everyone else has been left out.”

Kenya withheld backing for the Biden administration’s push for a global minimum rate of tax on multinational companies arguing the deal will stop Nairobi from collecting taxes from tech giants such as Google, Facebook and Amazon.

OECD, which hosted the talks on the overhaul of taxation rules, revealed early this month that Kenya was missing from the list of 136 countries that have backed the agreement.

The Kenya Revenue Authority (KRA) confirmed that Kenya was uncomfortable with clauses in the agreement that will force it to drop the digital services tax of 1.5 percent of sales.

“Members who join the statement are obliged to withdraw their unilateral measures such as digital services tax and similar measures imposed on non-resident companies which do not have physical presence in the market jurisdiction,” said Terra Saidimu, the KRA Commissioner in charge of Intelligence and Strategic Operations.

This would have forced Kenya to drop its own digital services tax, which came into effect at the start of January.

It is levied on the sale of e-books, movies, music, games and other digital content and applies to foreign companies.