Monday, July 08, 2013

ActionAid calls for end to harmful tax breaks
By Gift Chanda
Thu 04 July 2013, 14:00 CAT

ENDING tax breaks on corporate profits could help developing countries like Zambia improve public services such as health and education, an ActionAid research revealed yesterday.

The research, 'Give us a break - How big companies are getting tax-free deals', showed that tax breaks on big companies' profits cost developing countries, Zambia included, over US$138 billion in tax every year.

ActionAid's findings, which are likely to heap more pressure on African governments to relook their business models with multinational companies, show that the tax breaks given by developing countries to big companies could put about 57 million children who currently do not go to primary school, into the classroom with enough cash left over to meet international targets on basic health care provision and provide agricultural investment needed to end hunger.

An ActionAid investigation earlier this year found that British-owned company, Zambia Sugar, took the Zambian government to court to win the right to benefit from a tax break that reduced its corporate income tax rate from 35 per cent to 15 per cent but now 10 per cent.

This has resulted in an estimated loss to the Zambian government of US$3.6 million per year.

"Big companies are doing deals to avoid paying tax on their massive profits. They're playing developing countries off against each other to get good tax deals for them, but bad deals for the world's poor," ActionAid advocacy manager, Soren Ambrose, said.

Ambrose explained that governments were not collecting the tax which is rightfully theirs.

"They're openly letting big companies pay less tax," he said.

"Some countries are even offering completely tax free deals - a lose-lose for all involved, especially poor people in urgent need of services like schools and hospitals. In the long run, governments and companies are sabotaging the development of the skilled and healthy workforces that could lift their countries out of poverty."

The UK-based charity called for an end to harmful tax breaks and urged for increased cooperation between governments to prevent tax competition which leads to a 'race to the bottom'.

In addition to an end to harmful tax breaks, ActionAid is calling for an end to tax havens and an increase in tax transparency.

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