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.