ActionAid Zambia says revelations in the 2018 Financial Intelligence Centre (FIC) Trends Report has confirmed suspicions that some public projects whose economic benefits are questionable might be linked to corruption.

Commenting on the 2018 FIC Trends Report where public procurement activities were highlighted as being significantly vulnerable to corruption, and that procurement corruption had led to the crowding out of legitimate businesses, ActionAid stated that those found wanting, together with their allies, should be prosecuted.

“It is important that Zambia, as a country, takes bold steps to comprehensively address corruption linked to public contracts. To this effect, we recommend the following: comprehensive audit of all public projects and contracts; the audit of all these public projects will examine the true owners of the companies contracted; socio-economic benefits; scope of work; contract amounts; experience of the companies. Companies found wanting, together with their allies, such as Politically-Exposed Persons (PEPs); public service officials, who facilitate their dealings should be prosecuted! Lifestyle audit of civil servants, politicians: it is surprising that some civil servants, civil society leaders, religious leaders and politicians without a traceable business background and whose monthly earnings are modest have emerged as millionaires overnight! It is, therefore, important that civil servants and politicians are subjected to a lifestyle audit. This has potential to deter theft of public resources,” ActionAid stated, Tuesday.

It also recommended the amendment of the FIC Act and establish a fast-track courts to deal with economic crimes.

“Currently, the FIC Act provides that the role of FIC is responsible for the receipt, requesting, analysing and disseminating of the disclosure of suspicious transaction reports. However, there is need to amend the Act to empower the FIC to prosecute. Currently, the Act provides that the FIC should transmit reports of suspected money laundering for investigation by the law enforcement agencies or a foreign designated authority. However, it would be necessary that the Act is amended to enhance powers of the FIC to name suspects and undertake prosecution. There is also need to have in place fast-track courts to deal with financial crimes. These fast-track courts will ensure that the cases are handled urgently, which will eliminate any chances of the perpetrator to cover their crime,” it stated.

ActionAid further called for a policy where all political parties would be required to disclose their sources of funding.

“It also very sad that private companies that were awarded public contracts were funding some named political parties. This just confirms the argument by Civil Society Organisations to have political parties declare their sources of funding. To this effect, we hope MPs when debating the Political Parties Bill will eliminate their personal interests and ensure that this provision is not removed from the Bill and that the new law covering political parties will have provision for disclosure of sources of funding,” the statement read.

Meanwhile, ActionAid called for the review of outdated tax agreements to urgently deal with tax evasion

“The 2018 Trends Report observed that some companies externalized funds to their parent companies. The same companies would then receive the funds in the form of loans. This reduced their tax liability as interest on the loans received tax relief. ActionAid Zambia has been consistent on calling for the review of some unbalanced tax agreements Zambia has with other countries, which leads to revenue loss. Our studies have shown that certain companies move funds to parent companies and then receive loans from the parent companies. Companies move funds in many ways, such as payment for technical or management fees. This involves a company contracting technical or management services from a parent company and paying out huge sums. The funds are then sent back to a local company in form of a loan. The implication of this is that: if the tax agreement that Zambia has with another country provides for 0 per cent Withholding Tax (WHT) on interest payments, there will be no tax charged on interest payment,” stated ActionAid.

“Therefore, Zambia needs to review all unbalanced tax agreements (tax agreements with zero or lower tax rates) and adjust upwards tax rates for foreign companies. Additionally, there is need to prosecute organisations that practice false accounting. Some enterprises overstate their expenditure, which in turn reduces their profits and hence their tax obligations. This would require enhanced investment in e-governance with regards to tax revenue administration.”