Global Tax 50 2017: James Karanja

James Karanja is a new entry this year

Taxation plays a crucial role in promoting sustainable economic development. Research reveals that developing countries, which are generally put at a disadvantage because of weak capacities and corruption, collect tax revenues of only 15% (on average) of GDP. As a result of mounting pressure for a global solution, the demand for a programme that works to strengthen tax audit capacities, deepen international co-operation and increase transparency and compliance in MNEs led the OECD and the United Nations Development Programme (UNDP) to launch a partnership for a joint initiative that could level the playing field.

Originally thought up by Tax Justice Network Director John Christensen, Tax Inspectors Without Borders (TIWB) has assisted in the cumulative collection of $328 million in tax to date – a lot of the progress of which will only become evident in the years to come. TIWB brings in tax experts to work side by side with local officials in developing and emerging markets to tackle complex tax cases through hands-on mentoring and advising. Elected as head of the initiative in April 2016, James Karanja facilitates the tools and research support required to deliver effective audit assistance programmes for tax administrations.

The phrase 'give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime' seems appropriate for Karanja's work. His influence on strengthening a country's tax administration is immeasurable. Besides increasing the knowledge and confidence of local tax authorities, TIWB's expert guidance helps foster a culture of compliance through more effective enforcement.

As of this year, there are 27 programmes taking place in 23 countries with seven more programmes planned. Karanja aims to send a strong message to multinationals to change their behaviour. "We think that effect would be our biggest achievement as it would create more sustainable revenue for years to come," he tells International Tax Review. Most importantly, Karanja says the feedback he has been receiving has resulted in a massive shift in confidence. "This gives us the solid basis for the recognition that the initiative is on track," he says.

Back in 2012, eight pilot projects raised more than $260 million in revenue for Albania, Colombia, Ghana, Kenya, Senegal, Vietnam, Zambia and Zimbabwe. Since then, tax programmes with several other countries have been launched often in partnership with regional tax bodies, such as the African Tax Administration Forum and the Inter-American Centre for Tax Administration, with 100 more projects planned for 2020.

The results of the programme were instantaneously positive. A pilot project between Kenya and Botswana is a significant milestone for the initiative as a single audit of a Kenyan subsidiary of a multinational group increased profit tax revenues to $23.5 million for Kenya due to tax audit advice and guidance in 2012. And in Colombia, tax revenues grew from $3.3 million in 2011 to $33.2 million in 2014 because of transfer pricing audits.

Karanja's election to the top job at the TIWB global secretariat by the OECD was seen as important to cement the Kenya Revenue Authority cooperation with the organisation, which goes as far back as 2008 when Kenya commenced work on a capacity-building engagement on transfer pricing. Since then, the recognition of Kenya as a regional leader in transfer pricing is due, in part, to a sustained effort by development partners.

"TIWB is a mission initiative," Karanja said. It is about bringing together partnerships and collaborative efforts between regional organisations and international partners like the World Bank Group and the Commonwealth Association of Tax Administrations, to name a couple. For Karanja, the most exciting part of TIWB has been the partnerships. "You cannot reach every corner of the world by yourself. If it weren't for partnerships and close collaboration with other development partners, TIWB wouldn't have achieved what it has today," Karanja said.

As a final sentiment to this year's progress, Karanja wishes to say that: "Like our name suggests, our goal is to reach every corner of the world and ensure that multinational enterprises play their part in every country they operate in to provide the resources that are required to finance sustainable and equitable development."

"This is the broad message: we are open for business, we're up and running, we have resources at our disposal and are available to each and every region. The situation has changed. Developing countries are no longer helpless."