International financial centres (IFCs) are jurisdictions whose laws and institutions provide optimal conditions for the financial services industry. While some of the activities they encourage may have positive effects on a country’s economy, IFCs also facilitate money laundering, tax evasion, tax avoidance, and other practices generally considered harmful. These effects have been recognised at least since 1998, when the Organisation for Economic Co-operation and Development (OECD) established an international framework to counter harmful tax competition.
For an aid-recipient country like Kenya, the establishment of an IFC is problematic. Some features of IFCs can undermine the achievement of crucial goals – particularly tax collection, domestic revenue generation, and financial integrity and transparency – that donors pursue when they assist developing countries. This raises the question of how donors should respond to plans for the creation of an IFC in an aid-recipient country.
Waris, A. The Creation of International Financial Centres in Africa: The Case of Kenya. U4 Anti-Corruption Resource Centre, CMI, Bergen, Norway (2014) 4 pp. [U4 Brief, September 2014: 8]
The Creation of International Financial Centres in Africa: The Case of Kenya