Double taxation agreements in Kenya: A comparative analysis of the effectiveness of the OCCD and un tax treaty models.

Abstract

As a developing country that is wallowing in immense debt, Kenya has no option but to rely on all the revenue it can generate to drive development. Tax revenue plays a great deal in this since it is a major source of revenue for the country. About 90% of Kenya’s total revenue is derived from tax.1 According to a report, Kenya’s revenue portfolio is significantly driven by tax revenue.2 On July 2018, Kenya's tax revenue was reported at $952.895 million.3 Kenya has adopted the provisions of the OECD and UN Tax Treaty Models to protect itself from tax abuse when entering DTAs. However, Kenya loses some rights to tax foreign investors because of incorporating certain Models’ provisions in its DTAs leading to loss of revenue. This study has examined the OECD and UN Treaty Models and how their various Articles are incorporated into selected Double Taxation Agreements ratified by Kenya. Kenya’s taxation rights vary in different DTAs with some DTAs being adopted based on the OECD Model, some on the UN Model and some on both Models. This shows that DTA provisions are all dependent on how they are negotiated, meaning that in some instances, Kenya intentionally gives up its double taxation rights. By drawing lessons from the application of these Articles in DTAs, this study gives recommendations on measures that can be taken to more effectively secure Kenya’s tax base