ZAMBIA and Netherlands have signed a new tax treaty for the avoidance of double taxation with respect to taxes on income.
The treaty was signed at the sideline of the third International Conference on Financing for Development on Wednesday.
A tax treaty is a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries.
Representing the Zambian government, Minister of Finance Alexander Chikwanda said fundamentally, the purpose of the treaty is to promote international trade and investment by ensuring that businesses are not subjected to double taxation of certain types of taxes between the two countries.
He said subjecting businesses to double taxation is detrimental to investment adding that the treaty is one of the measures to tackle tax avoidance.
“I recognise and welcome the initiative and commitment of the Dutch Government to re-negotiate its tax treaties with a number of least developed countries and particularly include anti-abuse provisions in the new treaties,” Mr Chikwanda said.
Mr Chikwanda said the effort should be emulated by other developing countries to ensure that more taxes are paid in jurisdictions where companies generate their incomes.
Netherlands Minister for Foreign Trade and Development Co-operation Lilianne Ploumen signed on behalf of her country.
“By making use of loop-holes in tax treaties in combination with differences between national tax rules, internationally operating companies can avoid paying tax. It means that poor countries miss out on tax revenues, funds they clearly need for matters such as infrastructure and education,” Ms Ploumen said.
She said the Netherlands want sto help developing countries put a stop to this loss, preferably by means of internationally binding measures.
The Netherlands has tax treaties with over 90 countries.
Studies show that these international treaties of the Netherlands are not out of line, compared to tax treaties of other countries.
However, the tax treaty with Zambia, stemming from 1977, was outdated, and most treaties comprise no anti-abuse clauses.
This, among other things, meant that their unintended use was a risk in both countries.
Negotiations to replace the 1977 tax treaty were held in April last year in The Hague in Netherlands, where the two countries successfully renegotiated for the new tax treaty. https://www.daily-mail.co.zm/?p=36994 PUBLISHED IN THE ZAMBIA DAILY MAIL ON JULY 17, 2015
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