Why Tax Dodging is Bad for Zambia's Health

Christian Aid?s communications officer Charlotte Marshall reports on how tax dodging by some multi-national mining companies is costing Zambia millions in tax revenue ? making it impossible to repair its failing healthcare system. Campaigners at Rio+20 conference this week will tell delegates how getting international companies to pay the taxes they owe would generate billions in funding for sustainable development.

Background: Since the privatisation of the Zambian mining industry in the 1990s, multi-national companies have flooded into the country hoping to benefit from the country’s vast natural wealth.

Copper, Gold and Uranium are just some of the precious metals extensively mined in the country. Yet more than half of the population lives below the poverty line and average life expectancy is just 49 years old.

So why, given that Zambia is home to some of the world’s most sought-after resources, are its ordinary citizens still struggling to survive?

In part, the answer is tax dodging by some international mining companies, which are currently extracting unusually high profits. The Government of Zambia recently suggested that mining companies might owe the country as much as $1 billion in tax.

One of the ways in which unscrupulous multinational companies dodge tax is to artificially shift their profits out of Zambia. By deliberately manipulating the prices at which their international subsidiaries trade with each other, these companies are able to ensure the bulk of their profits end up in countries with very low tax rates – rather than in the country where they were really earned.

Zambia’s lack of tax revenue inevitably damages its public services and the poor people they serve. For instance, at least 10,000 people on average are forced to share just one doctor, HIV/AIDS rates are at 16 percent and at least 40 percent of the population does not have access to fresh drinking water.

And what’s worse, if Zambia actually received the tax it’s rightfully due, it could considerably reduce its reliance on foreign aid.