Mismanagement, corruption hardwired in Zambia’s financial and procurement systems, says Oxfam

OXFAM in Zambia says a media sweep on broader issues of transparency and accountability in Zambia shows that mismanagement and corruption are hardwired in the country’s financial and procurement systems.

In a statement on the recent Paradise papers revelations, Oxfam called for action to end inequalities of tax havens.

UPND leader Hakainde Hichilema is among several world figures named in a huge new leak of financial documents that reveals how the powerful and ultra-wealthy secretly invest vast amounts of cash in offshore tax havens.

The leak, dubbed the Paradise Papers, contains 13.4 million documents, mostly from leading offshore finance firm Appleby, along with corporate registries in 19 tax jurisdictions, which reveal the financial dealings of politicians, celebrities, corporate giants and business leaders.

Appleby itself has in the past said Offshore Financial Centres (OFCs) “protect people victimised by crime, corruption, or persecution by shielding them from venal governments.”

According to the leaks, there is nothing illegal in the investments.

But Oxfam stated that Zambia like several other African countries had not been spared the injustices and harmful impacts of tax dodging.

“A media sweep on broader issues of transparency and accountability in Zambia shows that mismanagement and corruption are hardwired in the country’s financial and procurement systems,” according to the statement.

“Zambian citizens have heard with frustration a litany of complaints about tax avoidance by high net worth individuals and corporates. This is in addition to the shocking annual Auditor General’s revelations of a wasteful and inefficient public service. These malpractices are compounded by a lack of prioritisation in how the country’s meagre public resources are used. A case in point is the procurement of fire tenders, ambulances and the construction of the Lusaka-Ndola dual carriageway.”

It stated that Zambians were also frustrated that recurrent scandals and abuses fizzle out with little repercussions for perpetrators.

“Seldom has there been any kind of legal consequences for most of these corporations and politically exposed individuals in and outside government responsible for mismanagement of the nation’s resources,” it stated.

“The iniquities and implications of such a damaging and rogue system are widespread and immense. These abuses are both the root of sustained inequality and an important obstacle to poverty reduction. For instance, a staggering 30 per cent of rich Africans’ wealth – a total of $500bn – is held offshore in tax havens. These rich Africans are using the global network of tax havens to hide about $14bn a year in taxes. At the same time, corporations have been estimated to prejudice Africa of $38bn annually in lost tax revenues. These figures when taken together with other resources lost illicitly, dwarf the annual aid flows to Africa.”

OxFam stated that such revenue losses compound problems of mounting and unsustainable debt, tightened spending on health, education and social protection.

It stated that the implications on the poorest in society, especially on women and girls, who were often left to pick up the pieces on their own, were significant.

Oxfam stated that when the public financial and procurement systems are dysfunctional; high net worth individuals and corporates take advantage of porous taxations systems to deprive government of due taxes, public resources are lost to corruption and it is the poorest people that pay the price.

“Poor people’s tax bill rise as government tries to bolster tax revenues, and with little public support the poor must dip into their own pockets to access essential services like health and education,”

it stated.

“The money lost by African governments a year is enough money to pay for healthcare that could save the lives of four million children and 200 thousand mothers and employ enough teachers to get every African child into school.”

According to Oxfam, in the context of Zambia, loss of significant tax revenues and unregulated public spending had resulted in excessive debt and alarming contraction beyond sustainable levels.

“The Financial Integrity Report 2015, as quoted by the Financial Intelligence Centre of Zambia, on illicit financial flows, Zambia is estimated to be losing an average of US$2.8 billion per year, through financial flows, while currently the debt borrowing stands at about 47 per cent of GDP. Oxfam in Zambia notes with sadness that these malpractices are not isolated but systemic and happen in a context of a constrained civic space where citizens’ rights to exercise their voice are being clawed back. These scenarios are tantamount to auctioning the country and the country’s resources to elite capture,”

reads the statement.

“The sense of impunity is dramatically affecting citizens’ trust in the rule of law and role of the State. It is also in the country’s interest to safeguard some economic gains recorded over the years. Much can be done by government in collaboration with civil society and citizens.”

Oxfam urged the government to close tax leakages by ensuring tax reforms that make tax systems more watertight and by re-considering tax incentives, double taxation agreements (DTAs) with tax havens and offshore jurisdictions.

“Prevention of wasteful and irregular public expenditure should be a top priority for government as part of its strategies for poverty and inequality reduction. This means that unfair and abusive practices should not only be called out, but sanctioned.”

Oxfam stated that government and oversight institutions must be agile, consistent and efficient in dealing with all unfair and abusive practices.

“Oversight institutions that are tasked with ensuring transparency and accountability in the utilisation of public resources must be strengthened to ensure that they are able to effectively execute their mandate independently, and without fear or favour,” it stated

“Zambia needs to implement recommendation by the High-Level Panel on Illicit Financial Flows by maintaining registers for beneficial owners of companies, strengthening corporate governance and financial related laws as well as enactment and effective facilitation of access to information by citizens.”

Oxfam called on all public leaders to work together to ensure that recent revelations of misuse and illicit externalisation of resources were acted upon. “We are calling on citizens to become a unifying force for change that leads to improved livelihoods for Zambia’s men and women, so that Zambia’s wealth and growth can benefit all rather than fanning further inequality,” stated Oxfam.

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