Tax avoid­ance costs EA coun­tries greatly


Tax avoid­ance by the global com­pa­nies still a big chal­lenge to de­vel­op­ing coun­tries and their peo­ple since bil­lions of money are taken away from im­por­tant pub­lic ser­vices ev­ery year.

Ac­tionAid es­ti­mates that elim­i­nat­ing cor­po­rate tax in­cen­tives in de­vel­op­ing coun­tries could raise over US$138 bil­lion in rev­enue an­nu­ally.

Speak­ing to par­tic­i­pants of the Tax Power Cam­paign course that took place at MS-TCDC in Arusha last week, Trainer Collins Othi­ambo of Ac­tionAid said tax avoid­ance and eva­sion in de­vel­op­ing coun­tries are es­ti­mated to lose be­tween US$120 and US$160 bil­lion a year in rev­enue owing to money hid­den in tax havens– more money than they re­ceive in aid.

Tax havens are coun­tries that of­fer for­eign in­di­vid­u­als and busi­nesses lit­tle or no tax li­a­bil­ity also pro­vide lit­tle or no fi­nan­cial in­for­ma­tion to for­eign tax au­thor­i­ties.

The one week train­ing in­volved par­tic­i­pants from Tan­za­nia, Kenya and Uganda who had a chance to learn more of tax is­sues in their re­gions and around the world.

Speak­ing of the im­pact of tax breaks in East Africa, Othi­ambo men­tioned that in Tan­za­nia a to­tal of TShs 381 bil­lion lost in 2008/092009/10. That amount equals to de­vel­op­ment bud­get of the Min­istry of In­dus­tries and Trade.

Uganda lost UShs 690 bil­lion in 2009/10, twice the health bud­get of UShs 375 bil­lion for 2008/09.

As for Rwanda, Rwf 141 bil­lion lost in 2009, 4.7 per­cent of GDP in 2009, nearly dou­ble ed­u­ca­tion spend­ing.

Whereby in Kenya, KShs 100 don’t go to pri­mary school,” he said

Adding that, pro­vide the agri­cul­tural in­vest­ment (US$42.7 bil­lion) needed to achieve a world free from hunger and meet in­ter­na­tional goals to re­duce ill health more than twice over (cost­ing a max­i­mum of US$58.9 bil­lion).

Giv­ing ex­am­ples from the re­search done by Ac­tionAid, he noted that one beer com­pany, SAB Miller: GBP 20 mil­lion per year in lost tax rev­enue – enough money to ed­u­cate an ad­di­tional 250,000 chil­dren.

On the other hand, Othi­ambo said one sugar com­pany, Zam­bia Sugar: cost Zam­bia US$17.7 mil­lion since 2007. That’s enough to put 48,000 Zam­bian chil­dren in school a year.

“The Global Cam­paign for Ed­u­ca­tion cal­cu­lated that, in Tan­za­nia, money lost to tax dodg­ing by big com­pa­nies could have paid for the train­ing and salaries for 70,000 new pri­mary school teach­ers needed, fund the build­ing of 97,000 new class­rooms and en­sure that ev­ery pri­mary school-aged child has a read­ing and math­e­mat­ics textbook,” he said

He in­sisted that, to stop com­pa­nies avoid­ing tax the gov­ern­ments needs to bet­ter tax treaties (es­pe­cially with tax havens), bet­ter na­tional tax laws that close loop­holes and pub­lic, trans­par­ent com­pany reg­is­tra­tion and ac­counts. Most im­por­tantly, to per­form pub­lic re­views of all tax in­cen­tives cur­rently in place or be­ing con­sid­ered, to al­low cit­i­zens, par­lia­ments and govern­ment of­fi­cials to weigh the costs of any fore­gone taxes against po­ten­tial ben­e­fits.

Gen­er­ally, Ac­tionAid’s Tax Power Cam­paign goal is to gen­er­ate in­creased cor­po­rate tax rev­enue in de­vel­op­ing coun­tries for sus­tain­able and gen­der-re­spon­sive qual­ity pub­lic ser­vices pro­vi­sion.

Tax Power Cam­paign change ob­jec­tives are to en­sure gov­ern­ments de­velop and en­force fair and trans­par­ent rules on cor­po­rate tax­a­tion. Make it so­cially in­de­fen­si­ble for cor­po­ra­tions to avoid tax or lobby for tax in­cen­tives and build a global move­ment for tax jus­tice with strong po­lit­i­cal clout.

Writer of this ar­ti­cle Sidi Mgumia (left) re­ceiv­ing a certi icate from David Onen, Course Co-or­di­na­tor at Ms-Train­ing Cen­tre for De­vel­op­ment Cor­po­ra­tion (TCDC) af­ter com­plet­ing a short course on Tax Power Cam­paign held in Meru, Arusha last week.

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