MUGWE: Pandora Papers exposé: Uhuru should apply the middle urinal rule

Don’t ask me how I know but there are universally accepted unwritten rules when using a public men’s toilet.

One, if you are the first guy in the toilet, always pick the urinal situated on one end; two, if you are the second guy in, pick the urinal situated on the other far end; three, make no eye contact or small talk; and four, which is the golden cardinal rule, if you are the third guy in, always leave at least one empty urinal, if not multiple, between the first and second guy.

This week, the International Consortium of Investigative Journalists made up of 600 journalists in 117 countries released their findings after a year’s worth of researching and analyzing more than 12 million records in what they dubbed the Pandora Papers leak.

The leak revealed hidden wealth, tax avoidance, and in some cases, money laundering by some of the world’s wealthiest and powerful people. This was one of ICIJ’s biggest ever global investigation.

President Uhuru Kenyatta and six other relatives  made it to the list, where it was revealed he and his mother were beneficiaries of an offshore foundation, and that his family is linked to 13 other offshore firms. One was valued as holding assets of $ 30 million (Sh3.31 billion).

It is no wonder that in 2011, Forbes Magazine ranked Uhuru as Kenya’s richest person, and the 26th wealthiest in Africa. It is, however, instructive to note that the ICIJ investigation did not show any evidence that Kenyatta’s family stole or hid any state assets in these offshore companies.

In response, Uhuru said he welcomed the investigation as it would help in enhancing the financial transparency and openness that is required in the country and around the world. He added that it would lift the veil of secrecy and darkness for those that cannot explain their source of wealth. He promised to give a comprehensive response upon his return from the Americas, where he is undertaking official state business.

Offshore accounts are not a new phenomenon. To qualify as offshore, the business activities must be based in a state other than the company or investor’s home country. Having offshore accounts is a preferred practice by high-net-worth individuals and corporations because it offers them favourable tax laws and this is why they are commonly called tax havens.

They also offer reduced risk and greater growth potential, significant cost savings for businesses, less red tape, diversification of one’s portfolio by investing in different asset classes and currencies, and protection of one’s assets, especially during times of instability and confidentiality.

Tax haven nations and their citizens benefit when their financial institutions bring in a vast amount of money in foreign currency, which is then invested for profit. Tax havens also generate additional revenues from registration, licenses, and renewal fees of offshore accounts.

For instance, in British Virgin Islands, which hosts roughly 400,000 companies compared to about 32,000 people, registration ranges between $9,000 to $18,000 depending on the type of company.

To demonstrate the strength of this revenue stream, in 2016, BVI collected over $200 million (roughly Sh22 billion) in corporate fees alone. This revenue creates a strong source of recurring revenue for tax haven governments. In addition, tax havens create employment and transfer of skills opportunities for their residents, and more affordable credit facilities.

As has been rightfully observed by Uhuru’s sympathizers, who include previous town criers in the now-defunct opposition, having an offshore account is not illegal. Never mind that in April 2009, the G20 declared the end of banking secrecy in the world.

But if one is a smart business (wo)man, given the challenges of enforcing this ban, and the enticing benefits of having an offshore account, they would be injudicious if they did not have an offshore account. Hence, we can safely conclude that neither Uhuru, nor his family have broken any law as far as the exposé on the Pandora Papers is concerned.

So begs the question, what’s the farce all about?

It is not a secret that tax havens have a downside. According to the Tax Justice Network that maintains a Corporate Tax Haven Index, which tracks jurisdictions that are most complicit in helping offshore account holders evade taxes, BVI, which is one of the tax havens Uhuru’s family has five offshore accounts, was the number one offender this year.

The CTHI ranked BVI as being responsible for 6.4 per cent of the world’s corporate tax abuse risks. It was closely followed by the Cayman Islands and Bermuda at 6.0 and 5.7 per cent, respectively.

When large corporations and high-net-worth individuals shift their profits to tax havens, they diminish the tax base in their home countries, while increasing it in the tax haven country. Yet governments make their money through taxation, by charging individuals and corporations levies on the revenue they generate to fund projects such as education, healthcare and social protection programmes. Offshore accounts decrease revenues to domestic budgets, which in turn deepens inequalities and poverty.

According to a report by the Africa Legal Network, Treasury announced it was beginning 2021 with a tax deficit of Sh125 billion. How much of this deficit could have been met, if the same amounts had been invested and taxed domestically, rather than in tax havens?

True, there is no written law that makes it illegal to hold an offshore account. Similarly, the men’s toilet etiquette on the rule of the middle urinal, is not in any written law. But all decent, right thinking, thoughtful, pragmatic, and politic men follow it to a tee.

In philosophy-speak, unwritten laws are called social norms. They are the accepted behaviours which form the social contract that govern societies. To prevent anarchy, most human beings play by the unwritten rules, even when they could get away with breaking them. The social contract is enforced through praise, blame or censure.

However, what Uhuru and his sympathizers are telling us is that as long as the law against offshore accounts is not written, then high-net-worth individuals and corporations have carte blanche to do as they wish, regardless of the deprivation they cause to their motherland, while enriching other foreign nations. Could this be the epidemic that has afflicted us as a nation?

The simple reason why we have unwritten rules is because we cannot have a rule that has a corollary that tells you how to observe the rule; and another corollary that tells you how to observe the corollary that tells you how to observe the rule.

In simple terms, unwritten rules are unwritten because the behaviour they seek to modify are unthinkable in decent and civilized societies.

There is a pervasive disposition of despair and hopelessness among the majority of Kenyans who just want to live, work and play in a country where they get value for the leadership they elect, for the goods and services they are taxed for, and for an environment they can freely apply their talents, skills and ideas in pursuit of their life, liberty and happiness.

However, we can change this tide of hopelessness in our favor. And we can do this through the Mississippi effect. Let me tell you how.

The Mississippi River meanders through its last several hundred miles before spilling into the Gulf of Mexico in a general course that cannot be altered by any event of less than cataclysmic proportions. Let us suppose you are taken to the bank of the Mississippi River, handed a shovel, and instructed to change the flow of this river using only that shovel.

You would probably think it impossible what one human being can do against something that powerful and majestic. However, with the same shovel, at the right place, you can begin to dig a cut, a small cut that would get bigger and bigger until the whole river would course through that new channel, and an entire curve of the river would be obliterated.

That, fellow Kenyans, is known as the Mississippi effect. It is also called the minority rule. It takes the unwavering commitment of a few brave but not reckless people, who persistently demand that unwritten social norms be treated as saliently as written rules. And by so doing, the Mississippi effect can radically change the course of politics and governance in this country.

I facetiously submit that taking into account the benefits of being a tax haven nation, and borrowing a leaf from the Kenyatta family on the personal benefits of having offshore accounts, and juxtaposing that with our depleted tax collection, probability of defaulting on our national loans, high unemployment rates and dwindling economy, we should now shout Eureka! at having discovered the panacea to our myriad of challenges.

And instead of Uhuru giving us more rhetoric on the Pandora Papers when he returns, I implore him to instead declare Kenya a tax haven and instruct his numbers in Parliament to commence legislation on the same, pronto!

Finally, my unsolicited advice is to Client 13173: Simply because there is no written rule that says don’t pee in the chapel, it doesn’t make it right for you to do so.

Likewise, simply because there is no rule that prohibits one from holding offshore accounts, doesn’t make it right in light of the revenue depletion and attendant ripple effects it has on a struggling economy like ours. Because the rule of the middle urinal is cardinal.

No written law has ever been more binding than an unwritten custom supported by popular opinion – Carrie Chapman Cat