Zambia signing its way out of tax revenues-ActionAid Zambia
A new report from ActionAid titled ‘Mistreated’ released this week has revealed that Zambia has 13 restrictive tax treaties that dramatically restrict the government’s power to tax global companies doing business on our soil and therefore unfairly limit our country’s potential to collect tax revenue.
The report also found that around the world, poorer countries are losing billions in revenue thanks to treaties that stop them taxing multinational companies.
The ‘Mistreated’ report is based on ground breaking research that has for the first time examined 3,000 international tax treaties, revealing which ones take away poorer countries’ ability to raise taxes on multinational companies.
ActionAid Zambia Acting Country Director Harriet Robina Gimbo said, “All national resources that can be mobilised behind the fight for development should be explored.”
She added, “Outdated and unfair treaties make it possible for multinational companies to potentially significantly reduce the tax they pay in Zambia. Women and children in poverty pay the price when crumbling with poor or no public services like schools and hospitals often starved of possible funding’’
ActionAid Zambia is now calling upon the Zambian government through the Ministry of Finance to urgently revise the very restrictive tax treaties that Zambia currently has in force, due to the potential for multinational corporate tax avoidance and the resulting negative impact on the country’s national budget and subsequently public services.
ActionAid says the funds that are lost through tax avoidance are desperately needed to pay for our schools, hospitals health and other infrastructure, and to sustainably and democratically fund the long-term fight against poverty and inequality adding that when these services do not exist, women and girls suffer the most.
It said Tax treaties play a facilitating role in many of tax avoidance schemes used by multinational corporations to reduce their tax liability and have played an enabling role in most well-known cases of aggressive tax planning by large companies.
ActionAid stated that Tax treaties open up opportunities for treaty shopping and sometimes facilitate double non-taxation.
“In addition to reducing overall tax paid by multinationals, the division of taxing rights created by tax treaties between higher-income and lower-income countries is often not fair. The International Monetary Fund (IMF) and the Organisation for Economic Cooperation and Development (OECD) have both acknowledged that this is a major problem for developing countries,” it said.
The study found that Zambia has restrictive treaties with the following 13 countries and should urgently consider revising them; China, Denmark, Germany, Ireland, Italy, Japan, Mauritius, Netherlands, Norway, Poland, Seychelles, Sweden and United Kingdom.
ActionAid said these tax treaties should go through immediate review, subjected to regular impact assessments, taking into consideration development implications of these treaties and ensuring that the negotiations are a transparent and inclusive process, open to public and civil society scrutiny. We consider the United Nations Model Treaty a useful minimum standard for these negotiations.