Zambia's Avoidance of Double Taxation Agreements (DTAs)

A Double Taxation Agreement (DTA) is a contract/ treaty signed by two countries (contracting states) to avoid or minimise territorial double taxation of the same income by the two countries. 

Each country has it's own laws and sometimes a person may be a resident of one and earns in come in another. Without agreements, the person maybe subjected to double tax on the same income in the country he is a resident, and the country he earned that income. This is basically the double taxation that is aimed at being reduced in an agreement. This is because without this agreement, a person will be demotivated to earn income if he will be taxed twice on the same income. So why would he earn the earn in another country when that country will tax him and the country he is a resident in, will also tax him? It will be a double lose for him as he may just be working to pay taxes in two countries.

To avoid this double taxation, country agreement on how they will reduce the taxes applied and make the person benefit and be motivated to invest or work to earn income. However, like most relief that is given, people take advantage of this and aim at eliminating or reducing their share of taxation to such levels that some countries, mostly developing countries, will end up without ever taxing the income that the person earns. This is the main reason why tax avoidance has been prominent recently. Sadly, the developed countries took advantage of this and enabled their citizens (companies included) to benefit from such and has resulted in massive illicit flows of resources from developing countries. If there was a fair share, no problems would exist.

Fortunately, injustice anywhere is a threat to justice everywhere, the same methods that were being used have now hit the developed world so much that what was a problem for developing countries, is not a "world problem". Almost all developed countries have found themselves in the same mess they tolerated. This is what has led to massive fights to end tax avoidance. We now have developed countries chasing companies and tax avoidance cases being so prominent when it has existed for developing countries for a long time. Some of the headlines in this topic are:  Bank BNP Paribas loses £35m UK tax avoidance case, Ladbrokes loses £71m tax avoidance case, HMRC wins 22 out of 26 tax avoidance cases in 2016-17, David Beckham and other celebrities lose £700m tax case, etc.

A serious search on this topic will show how wide-spread this financial problem is. Until the world is ready to agree on a fair share for the tax payer, we may have the problem increasing beyond control. Many NGOs have since been formed to try and help developing get a fair deal from the world economics. That clearly shows the problems being faced. 

Zambia has also been hit hard. We have companies that are always in lost making and not able to pay tax. How that is possible for a company to continue operating when you are always making loses shocks the brains in me. But this exists to an extent that I think the company will never pay tax unless we have someone put his foot down and deals with this situation. The day we will have this country getting tough on such issues, a lot of things will change. Until then, the handling of tax problems with kid gloves will continuously encourage this problem. Ever wonder why China kills tax offenders and has a great tax compliance rate? The way you handle tax issues, determines how your tax compliance will be. If you offer tax incentives to some businesses, expect the others not to pay as well. Everyone should be treated the same for tax purposes. Why would some people face no taxes merely for representing the people and you expect the people to pay taxes? These are issues that should be addressed for mother Zambia for you to expect changes in the way things are handled. 

For those interested in looking at Zambia's DTAs, the revenue authority has a list of treaties that Zambia signed and are in force. They also have a list of tax rates that are applicable in some of these treaties. This is shared below and shows: Status of the DTA, Entry into force, Applicable Rates (Dividends, Interest, Royalties and Technical Fees). With these days you can now understand things much more clearer when you read ActionAid Sweet Nothings Report or watch the BBC's Why Povery: Stealing Africa.

The DTAs are summarized as follows and can be found here: 

Amendment: 

After some enquiry, I realise I needed to defintion some terms for easy undertsanding of the table.

The term “technical fees” means payments of any kind to any person, other than to an employee of the person making the payments, in consideration for any service of a technical, managerial or consultancy nature. [source] 

Digital Migration: Zambia's Direction Part I

The Zambian digital migration direction seems to be non-Zambian driven and with little benefits to content providers and citizens. Serious, what has come out of this apart from a creation of a company when we expected many companies being handled by one distributor of content. What are the current licenses for content creators of digital media? Where can you even find such information? All these have no one particular person to push the agenda on a public point of view. So we have a process with little information and only seeing channels popping up in digital and then going into encryption, etc

But lets first look at this point from an angle we can handle for today. A simple introduction to such elements and then look at it in detail in follow-up write-ups.

So let's start simply with definitions of concepts that are involved. 

Digital Migration is a world-wide programme coordinated by the International Telecommunications Union (ITU) for countries to change the technology used in terrestrial television transmission from analogue to digital. This process was supposed to be completed by June 17, 2015.

The advantage of digital over analogue transmission include these important ones:

1. Clearer signal reception (High resolution picture of HD compared to analogue)

2. A wider selection of channels (the reduced spectrum entails more channels can be transmitted as compared to analogue) So a variety of channels will result at lower transmission cost - this follows on point 3 below

3. Reduced broadcasting stations’ cost. More companies can come into the broadcasting sector with reduced costed. Less is needed to setup broadcasting studios as before.

So simply put - digital migration is moving from analogue transmission to digital of the TV signals we used to receive in our homes with those antennas. 

Basically the simple explanation will make things easier as it makes simple things out of this process which seems to be complicated in Zambia. First the only complication that was expected was the delay due to limited funds to buy the necessary equipment for the process. However, we seem to find ourselves in more complications as the process now seems to have been taken over by private entities and we are not sure what is expected at the end. I will explain this. 

From the simple directive by the ITU, you would expect the simple change in your life will be the removal of analogue TVs and replacement with digital TVs. and from business and entertainment part of it, you expect more players in the sector with high quality products. Some issues in Zambia's digital migration are as follows:-

1. The delay to migrate has obviously created a problem in that few companies can now compete with countries in the region that migrated earlier. They have gotten better at creating content and will be supplying such content to Zambia at lower costs to make it impossible for our local content providers to compete. This puts most local content providers in a very bad position as they may not find means to produce and compete.

2. We are also facing teething problems with this process and probably not learning from the mistakes other countries made and corrected.

3. We seem to have moved from "digital migration" to "get topstar" decoder - of the two are not the same and this must be communicated effectively.

4. There is so much politics in the issue that is totally technical - maybe it is because of the money involved. But on this blog, politics are not on focus and ignored at best.

This post will focus of 3 above.

We need to clearly stick to the ideal situation of digital migration and then focus on the benefits that will come from this. Particularly, move local channels from analogue to digital. Then add more local content. So for a person owning a digital TV, they should see this improvement on their TV. If you want to encrypt the channels - the leave the ones which are supposed to be free to air (FTA). The likes of ZNBC. Encrypt those that are transmitted for purposes of making money. But I do believe our local content channels should be given a platform to be free of charges and subscription.

I mention as I have followed the digital migration process as I prepared and got myself a digital TV many years ago. I saw the first transmissions from GoTV (encrypted of course as I expected), and then the local channels being added including ZNBC 3. Then QTV, Prime TV, etc in digital transmission. Then the local channels got encrypted with only ZNBC 1 and ZNBC 2 remaining FTA. Now I have no problem with ZNBC 3 being encrypted if it was meant to be like that. Right now you can only access the local channels on TopStar. If this is the way things will be, can we spread the right message that - those without TopStar should only expect to watch ZNBC 1 and 2 and the rest on TopStar at a subscription.

Very few will have means to pay for local content at the same amount as more entertaining programs as European football which are only a few kwachas away. I'm then forced to ask, what are we doing to the local content providers if the aim is to charge subscription for these. Can we now compete with the likes of eTV and OVHD (www.openviewhd.co.za) at no cost? Do we expect these channels to grow when they start giving viewers a charge before they even make a name for themselves? These are issues of public interest which differs to a focus on "get a TopStar decoder" addressed below.

With a focus on get a TopStar decoder, people will only need to go out there and get a TopStar decoder and pay for it. With such, you throw it to the people to decide on which content they should pay for: - TopStar, GoTV, Kwese, DSTV, StarTimes, Zuku, and other various online IPTV services. 

With a monopolised system in premium content grabbed by Satellite TV providers, who would look at such content providers which wont provider world class series, sports, pay-per-view, etc which is based on license holders for Zambia. Such license is not controlled by any authority in Zambia. Which law would compel premier league to equally distribute rights without making monopolies in this country, ZICTA? Or will game of thrones be thrown at any of the service providers bidding for Lusaka, or other provinces? 

These are issues that need serious attention for our nation. What is the benefit of digital migration to a country if everyone is required to pay subscription to watch local channels? What advantage will the local channels have over foreign based channels which already have great advantage in terms of content and licenses?

Can policy be made over digital migration process to the benefit of the country both at producer level of content and viewers of the content. Let's not pick this process into making it into a monopoly of content distributor who will bring nothing but content from their countries. Right now, check all these content suppliers and the content they bring. Not one of them comes with Zambia content apart from bundling whatever they have with the FTA channels in Zambia and their country's content. We should at least promote our content in a way that will benefit content providers and viewers. We can't even watch our own local league without paying a foreign company for it. Next we will be paying foreign companies to make cartoons in Bemba and Nyanja! Then what benefit is that to us?

Let's not waste this opportunity to improve lives by making digital migration a wonderfully beneficial process to local content creators. The Zambian people have hunger to access local content, do not kill that with foreign content.