ActionAid Zambia has welcomed the government’s move to cancel the Double Tax Agreement with Mauritius.
Action Aid Zambia Country Director Nalucha Ziba said her Organisation has for a long time been campaigning for cancellation and re-negotiation of problematic DTAs Zambia has with different countries.
She said a Double Tax Agreement or tax treaty is a legally binding agreement between states, which governs the taxation of cross- border activities; namely investments by a resident of one state in the other state, and vice versa.
Mrs Ziba said Zambia has signed DTAs with different countries such as Germany, Ireland, Norway, Sweden, Mauritius (now cancelled) to mention but a few which spell out how companies investing in a country that Zambia has signed a DTA with their country of origin should be taxed.
She has explained that if for instance, if Zambia has a tax treaty with Mauritius, therefore a Multinational Company originating from Mauritius and operating in Zambia will utilize the tax provisions in the DTA between Zambia and Mauritius.
Mrs Ziba however said that in the recent times, Tax Treaties have not only been found to be unbalanced but also a source of tax evasion by most multinational companies, denying the host countries the much-needed revenue.
“For example, some DTAs provides for as low as 0-7 percent tax rate while others have no or weaker anti-abuse provisions”, she added adding that for some time now ActionAid has been calling for revision and/or cancellation of regressive DTAs like the now cancelled Zambia and Mauritius DTA.
She said the DTA between Zambia and Mauritius provided for 0 Percent Withholding Tax on technical fees paid for technical services.
Mrs Ziba said with this provision a Mauritius based Multinational Company, would take advantage of such provisions and not pay any WHT on technical services which is currently capped at 15 percent.
“For example, if this company engaged a sister company from Mauritius to provide technical services at a cost of USD100 million. This company when making this payment (USD100 million) to a sister company will not deduct any WHT. This implies that the entire USD100 million is untaxed. On the Contrarily, if the DTA provided for 15 Percent WHT on technical fees then USD 15 million would be deducted as Withholding Tax and remitted to Zambia Revenue Authority (ZRA)”, Mrs Ziba said.
She said Action Aid conducted a study titled “Sweet Nothings” which showed how Associated British Foods operating in Zambia as Zambia Sugar Company took advantage of the international tax agreement between Zambia and Ireland to avoid large tax payments.
Mrs Ziba said Zambia Sugar Company paid over US$47.6 million equivalent to about K209 billion, for management services and purchases to a fellow subsidiary called “Illovo Sugar Ireland” between 2007 to 2012.
She however said that the international tax agreement between Zambia and Ireland (before negotiation) exempted payment of Withholding Tax (WHT) for management
or consultancy services.
She said by channelling this money (USD 47.6million) through their Irish subsidiary, Zambia Sugar avoided paying an equivalent of US$7.4 million between 2007 to 2012.
“It is against this background that we commend the government for the position taken and we wish to encourage government to take a similar position over other unbalanced DTAs”, she added.
She has urged the government to ensure that an impact assessment/cost benefit analysis is done before they are signed and every five years thereafter.
Mrs Ziba said they should not follow the OECD model treaty but develop their own model adding that the government should negotiate for favorable and/or fair DTA’s Withholding Tax rates (10%-15%) which will not only promote foreign direct investment but also ensure that government collects adequate tax revenue.
Shd said all treaties should be negotiated transparently, and draft versions made available to the public prior to signature.
Action aid only employs women in top position? Is this the equal opportunity we hear about?. Anyway I digress. Pf is the only party that has put the interest of zambian first. You can hate us you in opposition but in 2021 the majority will speak. Not ba kabudo in the Bush
Kaizar Zulu you don’t understand anything on double taxation……. Your comments shows total ignorance…… va kupita….. mwaiche
In Malawi, 10 political parties came together to kick out the incumbent. In Zambia you want to kick out the corrupt while you are divided. Hakainde stole from privatization. Mumba has been found guilty by the courts from stealing Embassy money. Kambwili’s corruption is the PF corruption were as Minister he also got rich by sharing in govt tenders. All these have no credibility. And each wants to be president now. And you think you can remove a corrupt & criminal PF govt like this?
I don’t understand what she is complain about. Does she have a personal account tax haven Mauritius?
Can that ex-beauty (she now fat), also explain Tax agreement between Zambia and Sudan Gold thieves?
What’s tax agreement between Zambia and Pharmaceutical from non-existent countries?
It is good that these once upon a time NGOs start to say something.
This is a very good move. However, it doesn’t go far enough. The real problem with the paper corporations in Mauritius and other low or no tax countries, is tansfer pricing.
In other words, a Glencore sells it’s Zambian copper to a front in Mauritius at a loss, The Mauritian company which they own then sells it at the open market for the full market price.
Glencore thus avoids paying any taxes on their ‘loss’, and may even get a state subsidy. Transfer Pricing must be illegal.
Great move, very commendable move. But like Joe has said, transfer pricing must be curtailed by legislation as well. Why sign treaties from trade attachés that you don’t understand ? K 200+ billion is alot of money to lose. Min of Commerce should do more. I have never understood why foreign investors are given tax holidays while locals are not. On this move thumps up