Is Kenya the new haven for tax dodgers?

Tax havens such as Ireland and the Cayman Islands have become a key driver of vast inequality around the world, siphoning somewhere between $21 and 32 trillion from the global economy. As financial structures, they exist for one purpose only: to let the rich get around the taxes that pay for the infrastructure and services that everyone relies on. And now there is a new push underway to bring tax shelters to yet another part of the globe: Africa.

Until recently, there has not been a major tax haven in mainland Africa, despite failed attempts to create one - notably in Ghana and Botswana. But we may now be looking at the most serious attempt to date. Kenya, it seems, may be in the sights of the City of London: the effective Tax Haven Capital of the World. The City Authorities, and their 'independent' lobbying arm, CityUK, have been negotiating with the Kenyan government to help it develop, to use the official term, into an the poverty line, and growth rates well below the continental average, becoming an 'International Financial Centre' might sound like a sensible idea. But what does it really mean?

When speaking to business insiders, Kenyan authorities are clear: they plan for Nairobi to become a regional 'offshore' financial services hub, modelled on Ireland. In practice, this means that Kenya would become a see-no-evil, hear-no-evil haven for tax cheats and money launderers, governed by lax regulation that puts all the power in the hands of the multinational corporations.

Much of the blame lies with Britain. Being the midwife of new tax havens is increasingly a feature of the City of London's offer to the world. As a senior former banker testified to Parliament this year, 'They may be sitting in London, but they are exploiting other countries' tax regimes'.

This should be a source of intense embarrassment to David Cameron, as he uses his pulpit as Chair and host of next month's G8 summit to present the rich world's prescription for tackling tax evasion. Can people in the developing world have much faith in the man who not only presides over the Tax Haven Capital of the World, but who routinely goes to fight for it on the issues that really matter?

Kenyans are alert to the dangers. Activist groups, including ours, The Rules, are running a campaign to try and block the imposition of a staggering 16 percent tax hike on staples such as milk and maize. When a person with an average monthly income of $150 already spends over half of that on food, any tax increase is a significant burden. The effect on the poorest, who regularly spend 80 percent or more of their income on food, is nothing short of extortionate. It becomes unforgivable by a government that is not only allowing corporate exemptions and theft to the tune of $1.1 billion a year to go unchallenged, but is deepening their connections with those, like the City of London, who thrive off such business. Campaigners see all this as a portentous step along the path to reorienting Kenya's tax regime; a path they believe is leading inexorably to Kenya becoming Africa's flagship tax haven.

This is a concern to Africa but also to America and the rest of the world. The ability of multinational companies to access tax havens so that they reap huge profits but not pay their dues simply shifts the costs of national budgets onto ordinary citizens the world over. As the G8 Summit approaches, leaders like David Cameron must not be allowed to paint themselves as reformers, whilst turning a blind eye to the expansion of the tax haven system.

The last thing the world needs is for multinationals like Apple or Starbucks to have yet another offshore piggy bank unreachable by the IRS. It is a lose-lose situation for both Africa and the world.

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