'In the world’s poorest countries, the concerns are less about lifestyle and more about life and death.'

Christian Aid's new report seeks to expose the scandal of a global tax system that allows the world's richest to duck their responsibilities while condemning the poorest to stunted development, even premature death.

Introduction by John Davison; Zambia: Hard Bargaining by Andrew Ross

• Download the full report here (2Mb PDF)

At a time of switchback stockmarkets and fears of global meltdown, the world economy in 2008 is an uncertain and nervous place. Will
more banks collapse? Will the housing market crash? Can recession, or depression, be avoided?

In the world’s poorest countries, the concerns are less about lifestyle and more about life and death. What will be the impact on growth in
developing economies? Will the hope of a better, and longer, life for poor people be negated?

This debate is increasingly focused on the progress, or otherwise, towards the Millennium Development Goals (MDGs) set by the United Nations, which aim to halve world poverty by 2015. How will the money now be found to realise this ambition?

Pay up

Christian Aid has concluded that the necessary money, and more,
is already available – if only those who owe it would pay up. We are
talking about tax. This report seeks to expose the scandal of a global
taxation system that allows the world’s richest to duck their responsibilities while condemning the poorest to stunted development, even premature death.

This is in part to do with super-rich individuals. It is also to do with
governments, including the UK government, who have let this Situation develop and persist. But it is mostly about the world’s transnational corporations wielding their enormous power to avoid the attentions of the tax man – with devastating results.

The situation is stark and urgent. We predict that illegal, trade-related
tax evasion alone will be responsible for some 5.6 million deaths of
young children in the developing world between 2000 and 2015. That is almost 1,000 a day. Half are already dead.

Hard bargaining: Zambia

In the late 1990s, mines and smelters in the Zambian copperbelt were losing £500,000 a week after years of underinvestment and low
commodity prices.

Burdened with a large international debt, Zambia was forced by international pressure to privatise the mining industry.

Two London-based firms, banker Rothschild and international law firm Clifford Chance, parcelled the mining works into seven separate entities, which were then sold.

The agreements with the mines’ new owners, which run to more than 20 volumes, were negotiated by the government over a three year period with the aid of Clifford Chance, without the involvement of parliament, trade unions or any of the affected communities.

Rates

Over the past year Christian Aid and its partner organisations in Zambia have played a key role in bringing these development
agreements to light. They show that the general royalty rate was set at 0.6 per cent (with even that figure left negotiable) rather than the
3 per cent set in the 1995 Mines and Minerals Act.

The agreements are binding for up to 20 years. The deal meant that in 2004 mining companies contributed only about 12 per cent of all corporate tax revenues, though they accounted for nearly 70 per cent of export revenues. In 2006 , the Zambian exchequer received just £12m against £2bn of copper production.

Now, with copper quadrupling in value to about £4,000 a tonne in recent years, a newly elected Zambian government wants a better return.

President Levy Mwanawasa in early 2008 cancelled all tax concessions for the coppermining companies in the country, saying they were ‘unfair and unbalanced’, and raised the royalty rate to 30 per cent. He also announced that ‘windfall taxes’ would be introduced as the price of copper rose.

Zambia’s mine-owning companies, which include Canada’s First Quantum Minerals, Glencore International – the firm founded by controversial American commodity trader Marc Rich – and Vedanta Resources – the UK-quoted mining firm run by Indian billionaire Anil
Agarwal – rejected the new arrangements.

They want the matter adjudicated by the World Bank’s International Centre for Settlement of Investor Disputes.

Paltry

In 2005 it looked as though even Zambia’s paltry copper royalty rate
would be eclipsed by an iron-ore deal between the Liberian government and Mittal Steel, at the time the world’s second-largest steel company.

The company, owned by London-based billionaire Lakshmi Mittal, who in 2004 spent more than £ 30m on his daughter’s wedding, was able to retain complete freedom to set the sales price of the ore – giving it ultimate control over the amount of royalties due.

The deal was signed with the national transitional government that had been established at the end of Liberia’s devastating civil
war, just three months before democratic elections.

After an NGO revealed the contents of the deal in 2006, however, a new, elected government insisted on a revised contract.

• Download the full report here (2Mb PDF)

• Visit the Christian Aid Week website

References for the above text can be found on page 57 of the report