How Kenya has Implemented and Adjusted to the Changes in International Transfer Pricing Regulations: 1920-2016

transfer pricing; cross-border taxation; Kenya; Africa; tax avoidance; base erosion and profit shifting.A large proportion of international trade in goods and services is conducted between what are known technically as related parties. In practice, most of this trade is between different companies forming part of the same transnational corporate grouping. This is typically highly integrated in economic and financial terms, while legally appearing as a set of separate companies incorporated in a wide range of countries. For accounting, customs and general tax purposes, any two related companies engaging in cross-border transactions need to decide the price that they will set for the goods and services they exchange – ideally they will not make a profit off each other, as would be the case with unrelated companies. Inevitably, however, these are not market prices but administered prices. The process of setting these prices is known as transfer pricing (TP). In principle there is a standard mechanism, agreed internationally, to guide transfer pricing – the arm’s length principle. This means that cross-border transactions between related parties should be booked at the prices that would have applied had these been open competitive market transactions between unrelated parties (arm’s length transactions). It can be extremely difficult – and sometimes impossible – for revenue authorities to apply the arm’s length principle in daily operations. This paper analyses Kenya’s experience of trying to deal with transfer pricing, and looks at difficulties facing developing and middle-income countries in the application of transfer pricing rules. It discusses the course Kenya has taken in introducing TP laws, regulations, policies and administrative training in order to audit TP transactions effectively. Section 1 sets out the background to Kenya, its position in the African continent and globally, explaining why it has been selected as a case study. Section 2 sets out the historical experience of Kenya, both in developing its TP laws, regulations and procedures, as well as building capacity of its staff on issues of transfer pricing. Sections 3 and 4 reflect on the Kenyan position as set out in Section 2, and the appropriateness of some of the changes being proposed internationally by Actions 8-10 and 13 of the BEPS project of the G20/OECD. This paper attempts to unpack the issues surrounding TP in a developing country like Kenya, and to reflect on what is really needed in the BEPS process to make it usable in developing countries. The paper concludes by stating that the issues being raised in TP have been only partially resolved through improved capacity, regulations and policy. The OECD BEPS process does not seem to resolve problems faced by countries like Kenya, but instead foists a set of complex and unwieldy rules on Kenya and other developing and middle-income countries.Department for International DevelopmentBill and Melinda Gates Foundatio

Black money whitening law: a study from Bangladesh

Tax avoidance and evasion are deeply entrenched in Bangladesh, where 37% of GDP comes from ‘black money’. In this country of massive tax evasion, black money is not seen as tax evasion. Instead, tax amnesties are offered to whiten black money in an attempt to raise funds that revenue collectors would otherwise have found difficult or impossible to capture. The evidence on which this policy brief builds was obtained through field research, interviews in particular

Ten Truths about Tax Havens: Inclusion and the Liberia Problem

There has been a decades-long effort to repair an increasingly fragile international tax system. One reason it has foundered has been what we identify as the “Liberia problem.” In 2000, the powerful Organization for Economic Cooperation and Development identified Liberia—but not Switzerland—as a tax haven and targeted it for sanctions. It did not go well. During the two decades since, everything has changed; yet seemingly from this lens of inclusion, nothing has changed at all. Awkwardly similar “blacklists” still target “Black” and “Brown” jurisdictions despite the fact that experts mean something quite different when they speak of the “scourge of tax havens” and secrecy jurisdictions. We think differently in important respects but believe that those real disagreements demonstrate the need for a less insular global tax policymaking apparatus. And we share a conviction that a more inclusive and more level playing field in the international tax arena would benefit all states. To show why, we offer a series of “truths” designed to prompt a long-overdue conversation about perceptions of bias and privilege in international taxation

Towards establishing fiscal legitimacy through settled fiscal principles in global health financing

Scholarship on international health law is currently pushing the boundaries while taking stock of achievements made over the past few decades. However despite the forward thinking approach of scholars working in the field of global health one area remains a stumbling block in the path to achieving the right to health universally: the financing of heath. This paper uses the book Global Health Law by Larry Gostin to reflect and take stock of the fiscal support provided to the right to health from both a global and an African perspective. It then sets out the key fiscal challenges facing global and African health and proposes an innovative solution for consideration: use of the domestic principles of tax to design the global health financing system

Ten Truths about Tax Havens: Inclusion and the Liberia Problem

There has been a decades-long effort to repair an increasingly fragile international tax system. One reason it has foundered has been what we identify as the Liberia problem. In 2000, the powerful Organization for Economic Cooperation and Development identified Liberia but not Switzerland as a tax haven and targeted it for sanctions. It did not go well. During the two decades since, everything has changed; yet seemingly from this lens of inclusion, nothing has changed at all. Awkwardly similar blacklists still target Black and Brown jurisdictions despite the fact that experts mean something quite different when they speak of the scourge of tax havens and secrecy jurisdictions. We think differently in important respects but believe that those real disagreements demonstrate the need for a less insular global tax policymaking apparatus. And we share a conviction that a more inclusive and more level playing field in the international tax arena would benefit all states. To show why, we offer a series of truths designed to prompt a long-overdue conversation about perceptions of bias and privilege in international taxation

Beyond health aid: would an international equalization scheme for universal health coverage serve the international collective interest?

It has been argued that the international community is moving 'beyond aid'. International co-financing in the international collective interest is expected to replace altruistically motivated foreign aid. The World Health Organization promotes 'universal health coverage' as the overarching health goal for the next phase of the Millennium Development Goals. In order to provide a basic level of health care coverage, at least some countries will need foreign aid for decades to come. If international co-financing of global public goods is replacing foreign aid, is universal health coverage a hopeless endeavor? Or would universal health coverage somehow serve the international collective interest?Using the Sustainable Development Solutions Network proposal to finance universal health coverage as a test case, we examined the hypothesis that national social policies face the threat of a 'race to the bottom' due to global economic integration and that this threat could be mitigated through international social protection policies that include international cross-subsidies - a kind of 'equalization' at the international level.The evidence for the race to the bottom theory is inconclusive. We seem to be witnessing a 'convergence to the middle'. However, the 'middle' where 'convergence' of national social policies is likely to occur may not be high enough to keep income inequality in check.The implementation of the international equalization scheme proposed by the Sustainable Development Solutions Network would allow to ensure universal health coverage at a cost of US$55 in low income countries-the minimum cost estimated by the World Health Organization. The domestic efforts expected from low and middle countries are far more substantial than the international co-financing efforts expected from high income countries. This would contribute to 'convergence' of national social policies at a higher level. We therefore submit that the proposed international equalization scheme should not be considered as foreign aid, but rather as an international collective effort to protect and promote national social policy in times of global economic integration: thus serving the international collective interest

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The right to health of non-nationals and displaced persons in the sustainable development goals era: challenges for equity in universal health care

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The World Health Organisation (WHO) was inaugurated in 1948 to bring the world together to ensure the highest attainable standard of health for all. Establishing health governance under the United Nations (UN), WHO was seen as the preeminent leader in public health, promoting a healthier world following the destruction of World War II and ensuring global solidarity to prevent disease and promote health. Its constitutional function would be ‘to act as the directing and coordinating authority on international health work’. Yet today, as the world commemorates WHO’s 75th anniversary, it faces a historic global health crisis, with governments presenting challenges to its institutional legitimacy and authority amid the ongoing COVID-19 pandemic. WHO governance in the coming years will define the future of the Organisation and, crucially, the health and well-being of billions of people across the globe. At this pivotal moment, WHO must learn critical lessons from its past and make fundamental reforms to become the Organisation it was meant to be. We propose reforms in WHO financing, governance, norms, human rights and equity that will lay a foundation for the next generation of global governance for health