Diakonia - People change the world

Tax transparency - Where do corporations with operations in developing countries pay taxes?

Swedwatch has in cooperation with Diakonia examined how four Swedish multinational companies think and act regarding tax payments in Zambia. The report shows that although the companies are not guilty of tax evasion, they provide no information on how they handle tax planning as a matter of corporate responsibility.

Lack of information

For the scope of the study, Swedwatch has not found that any of the four surveyed companies (Sandvik, Atlas Copco, SKF and Ericsson) are guilty of unethical or illegal tax evasion from Zambia.

Swedwatch however notes that despite the fact that all the four companies operate in Zambia, basically no information on Zambia in the companies' annual reports can be seen. Furthermore, none of the companies were willing to disclose figures on earnings and tax payments in Zambia. As of now, the companies have also not yet defined how to handle tax planning globally as a matter of corporate responsibility.

Limited ability to monitor

Although tax evasion from developing countries is one of the most obvious barriers to global poverty, the public is currently not able to deduce any information regarding tax payments in the vast majority of multinational companies' public accounting operating at a country level.

If companies commit to increase the transparency on taxes at the country level, it would be much easier for civil society organizations in developing countries to hold their governments accountable regarding how public funds are used. In the long run, this can be an important tool to prevent corruption and misappropriation of taxpayers' money in developing countries.

Diakonia's partner JCTR urges the Zambian government to:

Support efforts and build capacity of the Zambia Revenue Authority in tax administration through enhanced and continuous training of all staff at all offices throughout the country.

Review all tax agreements with developed countries and revise all agreements that are not beneficial to the country.

Draft and implement a law that demands multinational companies operating in Zambia to publish their tax policies and the principles guiding companies’ global tax planning.

Diakonia urges the Swedish government to:

Work within the EU, OECD and other international forums in support of legislation for country-by-country reporting.

Work to increase transparency internationally on the ownership structures of companies. This includes requirements for multinational enterprises to completely account for their ownership of subsidiaries and holding companies.

Review existing double taxation agreements and conduct an analysis as to how these agreements affect the preconditions for tax revenue intake in developing countries.