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]