There is obviously a lot of debate about off shore investments and their tax implications. So, what is off shore investment and what are tax havens? Well let’s put it simply for all of us to understand. When people have more money than they can consume, they can invest the excess. However, they will need to pay tax on the ‘profit’ from those investments. Depending on where they invest, they may pay very little tax or no tax at all. There are some countries which charge very little tax or no tax at all to any incoming investments in order to attract investments, and so many rich people and businesses have invested in these countries and this is perfectly legal.
So, what is the fuss? Well to start with, this scheme has been surrounded by secrecy and there is no one to scrutinise it. And because of that it has attracted money from questionable sources and unstable countries and has become a preserve of the rich. Many people have acknowledged that this is a problem including Barack Obama when he was President.
The Debate
Most of the people who invest in these countries are rich people. So, the issue is not the legality but rather a moral one. The idea is that governments need taxes to provide social services and so in theory no one should shun paying tax, understanding what tax is for. The social services such as education and health are most needed by the very poor in society who cannot afford private health and education. Yet the rich can afford that. So, if on top of all they can afford, they also avoid to pay tax, how should governments fund these services? Tax the poor to fund social services for the poor? Is that fair?
These investors also hire accountants and lawyers to find loopholes in regulations about limits in repatriation of profits and use that to avoid paying tax. This is what advocates for the poor people and poor countries are up against. Tax is not a punishment on any business or an individual, it is for a purpose. That is why governments promote businesses so that they can create employment for people and in turn receive taxes from these businesses and thereby grow the economy.
In 2012, it was revealed that Starbucks had not paid tax in the UK for the previous 3 years. Even though this was perfectly within legal limits, the public protested by stopping to buy from them. In an attempt to win back customers, Starbucks volunteered to pay £10m in taxes over the next two years. They also said they were not going to ‘claim tax deductions for royalties or payments related to intercompany charges’ (Neville and Treanor, 2017).
Paradise Papers
‘The Paradise Papers was a special investigation by the Guardian and 95 media partners worldwide into a leak of 13.4m files from two offshore service providers and 19 tax havens’ company registries. The files reveal the offshore financial affairs of some of the world’s biggest multinational companies and richest individuals, and set out the myriad ways in which tax can be avoided using artificial structures’ (Hopkins, 2017). The whole purpose is to force rich people to pay a fair amount of tax like everyone else.
By J Mwanza
(BAcc Hons, Student-MSc Investment Banking and Finance)
References:
Neville, S. and Treanor, J. (2017). Starbucks to pay £20m in tax over next two years after customer revolt. [online] the Guardian. Available at: https://www.theguardian.com/business/2012/dec/06/starbucks-to-pay-10m-corporation-tax [Accessed 15 Nov. 2017].
Hopkins, N. (2017). Why we are shining a light on the world of tax havens again. [online] the Guardian. Available at: https://www.theguardian.com/news/2017/nov/05/why-shining-light-world-tax-havens-again-paradise-papers [Accessed 16 Nov. 2017].
The problem in Zambia is the government squanders tax payers monies.There is no accountability and the auditor generals report year in and year out confirms this.Go to UTH are there medicines? Look at our roads despite all the toll fees we pay.Look at our water supply despite the abundance of fresh water in Zambia.The government thinks they are doing us a favor when they work when in fact it’s our money doing the work.They don’t need praise or lavish ceremonies when they open roads -its tax payers monies!! to get a high job in government you need to appeal to the cadres and be ready for cut backs on whatever contract…I would rather put my money in a tax haven
@Lindiwe you have valid points but check the article under discussion and make a contribution.
We pay taxes just for them to steal. No one has yet explained the $42M and other lost funds
Investment of wealth In tax havens is not Illegal. What is illegal is to fraudulently acquire wealth stolen from kick backs after under valuing properties during privatisation saga. This will haunt the tonga president for life.
So we have to help these students write their academic papers too?
Some people are even against the idea that investing by marrying whites improves economy.
– Once you show bank that you have foreign account you get loan.
– a teacher married to a white woman will get promoted to headmaster.
Dear Mr President… Tax havens are the solution for Zambia. Make Zambia a tax haven. Let the worlds super rich billionaires secure their monies here.
It is easy to parade the poor for a slice of bread a bid to make a political point. This women in the picture could genuinely use some help, but to use her in this manner when she does not even have a clue what taxes are is really pathetic!
The problem is politicians and business men like Hakainde Hichilema who do not pay tax. They hide their monies. So, where is the government going to find money for medicines in the hospitals?
42,000,000 havens
$288,000 ambulance havens
Expensive and loaded roads havens
Flying all over the world allowance havens
Buying expensive government cars havens
Selling expensive government cars to select few for peanuts havens
Buying expired medicines for peanuts at expensive amounts havens
Auditor general clearly labeled misappropriation of funds with no punishment havens
That is where PUBLIC FUNDS are bleeding from not tax havens, tax havens si ndalama za anyoko
Grabbing land havens
Selling Victoria Falls plots havens
Avic single sourcing havens
ETC ETC ETC ETC ETC ETC ETC ETC ETC
Why wait on others to work harder and pay tax on your behalf, for you to access social amenities, while you always busy making unplanned babies every night.
YOU ARE RIGHT LINDIWE, GOVERNMENTS IN ZAMBIA ARE WORSE AND I MEAN ALL THE GOVERNMENT APART FROM UNIP, UNIP WAS A PARTY FOR THE PEOPLE AND EVEN IF YOU LOOK AT THE LEADER , IT SHOWS THEY DINT MISUSE OR STEAL ALOT.
NOT KA CHILUBA NA BA MWANAWASA WAS A THIEF BECAUSE HE ALLOWED FOOLS LIKE MMEMBE AND NCHITO TO TAKE OUR RESOURCES, THEN CAME CHI LUPIA BANDA THE OLD MAN HAD NO MERCY IN STEALING N HE IS THE REASON LUNGU IS ALSO MISUSING FUNDS, AND TALK OF BENA sATA, HE WASNT AS BAD BUT HE HAD CORRUPT GUYS LIKE WINTER,BROUGHT BACK THIEVES LIKE MMEMBE AND NCHITO, SO WE HAVE HAD A BUNCH OF CROOKS AS LEADERS IN ZAMBIA. I HAD HOPE IN LUNGU BUT HE CHOSE A CROOK TO MENTOR HIM AND CHOSE DULL *****S LIKE KAIZER ZULU AS ADVISERS, WE ARE GOING NO WHERE IN DEVELOPMENT WITH THESE CROOKS
$42,000,000 havens
$288,000 ambulance havens
Expensive and loaded roads havens
Flying all over the world allowance havens
Buying expensive government cars havens
Selling expensive government cars to select few for peanuts havens
Buying expired medicines for peanuts at expensive amounts havens
Auditor general clearly labeled misappropriation of funds with no punishment havens
That is where PUBLIC FUNDS are bleeding from not tax havens, tax havens si ndalama za anyoko
Grabbing land havens
HH doesn’t pay tax in Zambia just like he stole privatization monies. But he hides his monies outside the continent. Azaivoteela ekaaa…mambala..!!!
@Mutinta,,,,
What does this sentence really mean?:
HH doesn’t pay tax in Zambia just like he stole privatization monies.
IWE CHOSEN, THE FACT THAT THIS GOVERNMENT IS HIJACKED BY CROOKS SHOULD BE THE EXCUSE FOR OTHER CITIZENS TO CONTINUE THEIR CROOKEDNESS WAYS, HH IS A CROOK AND THE MOMNEY HE HAS IN THE SO CALLED HAVENS IS STOLEN MONEY FROM OUR BELOVED ZAMBIA, HIS IS NO DIFFERENT FROM LUNGU, KAMWILI AND THE REST, BONSE NIBAKABWALALA SIMPLE
This article is a cheap shot by pf. The money being stolen could have resolved most of the problems like hunger and medicine.
What the writer of this article has raised here is that if a citizen keeps profits in tax havens it means that money is not invested back in the economy and so doing denying the citizens employment opportunities from which taxes can be collected for investment in social services.
The action of HH is not in the beat interest of the country especially as a politician who is condemning the ruling parry for non provision of good social services by not reinvesting profits earned from our economy while paying what ever little taxes to those govts benefiting foreigners in those countries.
And like the writer has said these money could have been gotten illegally,HH has not explained the sources of his riches, this will not help him politically.
Research bane in a sober manner on where the tender monies are going. How much is involved, who is involved and where it is hidden?
If this was written for an exam in international taxation I would fail the candidate. The point of investing in a tax haven for most of those who did it was that those states did not exchange information about it with the resident state of the investor. Almost all states tax earnings on financial investments in low tax jurisdiction. So the writer is correct when saying it is legal to invest there. He will flunk the exam because he fails to mention the important part: Tax evasion in the resident state by failing to declare the income from the investments in the low tax have, knowing that the resident state would never now.
Who gave that woman that sign?
I highly doubt she wrote it herself.
These are games being played with the kinds of Zambians.
This tax haven bull is not going to quiet down.
Mark my words, many people will start believing HH has done something wrong, due to these sort of articles.
Yet there is no proof to that extent.