Tackling Global Tax Inequity

... Zambian Civil Society Organizations (CSOs) advocate for an inclusive and equitable global tax system that will help to tackle the widespread issues of tax evasion

By Francis Maingaila ♥️

Lusaka, Zambia - (30-12-2024) - Civil Society Organizations (CSOs) in Zambia are advocating for an inclusive international tax system to address growing inequities and combat tax evasion and avoidance, which remain global challenges requiring comprehensive and collaborative solutions.

Speaking at the half-day Civil Society for Poverty Reduction (CSPR) CSO and Media Capacity Building Meeting on the UN Tax Convention, supported by Norwegian Church Aid, DCA, and the Joint Country Programme Zambia, Ishmael Zulu, a prominent tax reform advocate, highlighted the framework's shortcomings.

He provided an overview of the UN Tax Convention and Zambia's engagement, focusing on two key pillars: Zambia's involvement in the global tax agenda, the implications of the UN Tax Convention, and key advocacy moments for 2025.

Additionally, Zulu emphasized the importance of strengthening media voices on the UN Tax Convention, outlining strategies and advocacy approaches for advancing the UN tax agenda.

While Zambia is a member, Zulu suggested, the process often sidelines developing nations during negotiations.

Despite its name, the Inclusive Framework—a global initiative designed to reform tax systems—has faced criticism for excluding developing nations from meaningful participation.

Countries like Zambia are calling for reforms to ensure true inclusivity in international tax policies.

Wealthier countries dominate discussions, presenting pre-negotiated agreements for implementation without the input of nations expected to execute the reforms.

“Zambia often receives 2,000-page documents negotiated by wealthier nations and is expected to implement them without being part of the conversation,” Zulu explained.

This sentiment is echoed across Africa, where only 28 out of 54 nations are members of the Inclusive Framework.

More than a third of the world’s countries are excluded from critical tax negotiations, with developed nations, such as the United States and European powers, controlling decision-making processes.

Zulu also criticized the financial dependency of Zambia’s participation in these forums, often funded by wealthier nations, which limits the country’s ability to engage fully and independently.

In response, African nations, led by Nigeria, are pushing for a new tax body under the United Nations (UN) to ensure equal representation for all countries.

According to Zulu, a UN proposal outlines three potential approaches, including a UN multilateral instrument, a UN framework convention, and a binding international cooperation framework.

“The proposed UN framework would guarantee equal participation from developed and developing countries alike,” Zulu stated.

This movement follows a 2022 UN resolution assessing the current tax system and a subsequent resolution in 2023 to establish a more inclusive global tax body.

Zambia has committed to advocating for reforms during negotiations set for 2025.

As part of these efforts, Zambia seeks to address domestic challenges, particularly in its mining sector.

Despite being rich in copper, cobalt, and emeralds, mining revenues remain disproportionately distributed.

“Just seven out of 2,000 registered mining companies account for 80% of revenue,” Zulu revealed.

He highlighted the sector’s historical underperformance, noting that essential services like electricity and clean water remain inaccessible to many Zambians despite over a century of mining activities.

Zulu raised additional concerns about illicit financial flows (IFFs) and tax avoidance. The Financial Intelligence Centre (FIC) reported over $2.8 billion in suspected IFFs within just three months, reflecting a troubling trend of capital flight through opaque transactions.

Zulu emphasized that such schemes deprive Zambia of vital resources for development.

“The money isn’t missing; it’s hidden through illicit practices,” he said, urging stronger enforcement of tax laws and renegotiation of outdated double taxation agreements with countries like France and Switzerland.

Zulu also criticized Zambia’s “race to the bottom” in offering tax exemptions to attract foreign direct investment (FDI).

Policies allowing mining companies to deduct mineral royalties from taxable income not only reduce government revenue but also foster harmful tax competition with neighboring countries.

Zulu contextualized Zambia’s struggles within a flawed global tax system. He pointed to the dominance of institutions like the Organisation for Economic Co-operation and Development (OECD), which often prioritize the interests of developed nations.

He also questioned the legitimacy of the G7-led global minimum tax rate of 15%, arguing that it undermines the sovereignty of developing countries to set tax policies that suit their needs.

“Seven nations cannot dictate tax rules for the world,” Zulu remarked, advocating for greater representation of the Global South in tax policy discussions.

Zulu’s call for reform resonates beyond Zambia, as developing nations push for a fair and inclusive international tax system.

By championing UN-led initiatives and addressing domestic inefficiencies, Zambia aims to secure a stronger financial future.

As negotiations progress, the country’s efforts highlight the need for equitable policies that empower all nations to participate in shaping the global tax landscape.

Speaking at the same occasion, Kapembwa Namuyemba, Principal Budget Analyst at the Ministry of Finance and National Planning, highlighted Zambia's active involvement in shaping international tax reforms to ensure fair taxation in the context of globalization.

Namuyemba explained that globalization has made tax systems increasingly complex as countries compete to attract foreign direct investment (FDI).

He noted that in this competitive environment, countries often reduce their tax rates, which in turn affects the ability of other nations to collect fair taxes.

In light of this, Zambia has signed numerous Double Taxation Avoidance Agreements (DTAAs) with other countries.

Since 1951, these agreements have aimed to ensure that income is not taxed twice, facilitating smoother cross-border trade and investment.

Namuyemba also discussed the importance of the global minimum tax rate, which has been set at 15% for multinational corporations with revenues exceeding 750 million euros.

This initiative, developed by the Organization for Economic Co-operation and Development (OECD) and G20, is designed to curb tax avoidance by multinational companies that shift profits to jurisdictions with low tax rates, thus ensuring that corporations pay their fair share of taxes in the countries where they operate.

The challenge of taxing digital businesses such as Uber and Airbnb was also addressed. These businesses often operate without a physical presence in certain countries, making it difficult for those countries to levy taxes on them.

Namuyemba explained that as part of ongoing efforts to modernize tax systems, Zambia is adapting its approach to taxation in line with international efforts to ensure that these companies contribute their fair share of tax revenues.

Namuyemba further highlighted Zambia’s active participation in international tax bodies such as the United Nations (UN) Committee of Experts on International Tax Matters and the OECD.

These platforms provide Zambia with the opportunity to engage in global discussions on tax reforms, where the country contributes its perspectives and experiences.

Through this participation, Zambia is helping to shape tax reforms that seek to achieve a fair and equitable tax system for both developed and developing countries.

In addition, Namuyemba pointed out the ongoing negotiations for the adoption of a UN Tax Convention. This convention, which is expected to be finalized by 2027, aims to address tax abuse and promote greater transparency in tax matters globally.

According to Namuyemba, the finalization of this convention will mark a significant step toward achieving global tax equity.

Zambia’s involvement in these international tax reforms demonstrates its commitment to playing an active role in shaping tax systems that promote fairness, transparency, and equity for countries across the globe.

Namuyemba’s insights underscore the importance of international cooperation in addressing the challenges posed by globalization in the tax world.