The United States demands that the Kenya Revenue Authority (KRA) spy on American firms and investors for money laundering and tax evasion as a condition for a trade deal between the two countries may have started to bite if information obtained by this publication is to go by.
The Biden administration wants Nairobi to enforce an agreement signed in 2014 that requires Kenya to share information on tax evasion linked to US firms or investors involved in trade with America.
The tax agreement was signed in Washington on August 6, 2014, during the Barack Obama era.
The KRA will be expected to gather and share information such as income declarations, bank records and data on goods shipment and allow its employees to appear as witnesses in the US courts.
Kenya is also expected to seize and forfeit goods associated with tax evasion and money laundering breaches by Americans and investors with dealings in the US.
Whereas sources at the KRA and the Treasury reckon that Kenya has been reluctant to enforce the 2014 agreement for fear of upsetting big US corporations and high-net-worth investors, it seems it has started to cow.
GOLD DEALER FARR TARGETED
According to information we have received from our sources, KAR has reportedly picked interest in Lynnwood Farr, an American citizen who lives in different countries which include among others; the US, Canada, Switzerland, Guinea Conakry, but now is based in Nairobi, Kenya where he opened up a gold refinery in the compound of the Wilson Airport.
A shrewd businessman, Karr is said to be friends with many police officers in Kenya, while some reports claim he is linked to other powerful public officers including some presidents on the African continent.
We have now learnt that because of such claims, Kenyan revenue authorities picked interest in his dealings, particularly intending to probe any tax related breaches against him.
BACK TO USA-KENYA TRADE DEAL
It has emerged that throughout the Donald Trump era, businessmen like Karr got a ‘safe haven’ of sorts when the former decided to pursue an exclusively “America First” foreign policy. This saw him reverse or go slow on most of the foreign policy arrangements which had been signed or initiated by his predecessor Barak Obama. Among such policies was The 2014 agreement provides for “the legal framework for the exchange of information and evidence to assist countries in the enforcement of customs laws, including duty evasion, trafficking, proliferation, money laundering, and terrorism-related activities.”
The agreement requires that “Upon request, a Customs Administration shall exercise special surveillance of persons known to the requesting contracting party to have committed an offence or suspected of doing so, particularly those moving into and out of its territory.”
This essentially means that the US government expects the KRA to alert it on firms that under-declare tax, especially custom duties. KRA is also mandated to inform Washington of firms whose actions could damage America’s public health, economy, security or other vital interests.
Despite Trump’s decision to shelve the implementation of the pact during his reign, his successor Joe Biden has already shown intent to reactivate it, together with other pacts that were reversed by Trump.
This means that large American corporations in Kenya including among others; Cummins, Dupre Investments, General Electrics, Coca-Cola, IBM, Ormat Technologies, Alternate Systems, Mars, Mastercard and Microsoft will be under strict watch.
This roving eye will also be extended to other companies like Everstrong Capital, Uber, Netflix, Google, Amazon, Uber, and YouTube.
Biden is keen to raise more taxes from Americans and US firms. He has toyed with the idea of introducing a minimum tax targeting the wealthy.
Under an earlier proposal, America’s 0.01 percent richest would face a minimum 20 percent tax on income.
The Biden administration in July launched a fresh strategic trade and investment partnership with Kenya, replacing an agreement the Trump government had inked with Nairobi.
The US and Kenyan governments will start work within three months to develop a roadmap for engagement in 10 areas including agriculture, digital trade, action on climate change, and trade facilitation and customs procedures, the US Trade Representative’s Office said.
The launch follows last year’s statement by the Biden administration that it would review the Trump-era bilateral trade negotiations with Kenya in 2020 over a potential free trade agreement (FTA).
Trump and President Uhuru Kenyatta had in February 2020 announced the intention to start formal trade talks, triggering activities that were expected to culminate in a deal within two years and ahead of the August 9 General Election.
Kenya has long sought a full free trade agreement with the US, and negotiations for such a deal to lower bilateral tariffs were launched by the Trump administration with the East African nation in 2020.
But the Biden administration, which has shunned traditional trade deals, did not resume those talks.
Kenya enjoys substantial duty-free access to the US market through the Africa Growth and Opportunity Act (Agoa), a trade preference programme for sub-Saharan African countries, but it expires in September 2025.
Kenya exported Sh82.2 billion worth of goods to the US in 2021, of which more than 75 percent entered duty-free under Agoa.
The US exported Sh67.3 billion worth of goods to Kenya in 2021, with aircraft, plastics, machinery and wheat among the largest.
The partnership announced by the two countries on Thursday made no mention of reducing tariffs or enhancing market access, in line with other recently launched US trade dialogues with Britain, the European Union and Indo-Pacific nations.
The Kenya dialogue will include efforts to develop micro-, small- and medium-sized enterprises and discussions on enforcement of labour laws and promoting workers’ rights — central components of the Biden administration’s other trade initiatives.