Taxation and organized state criminality: The case of Zambia

Fred M’membe, the publisher of The Post newspaper of Zambia, is accused of having committed the crime of willfully and deliberately not meeting tax liabilities since 2011, when the Patriotic Front (PF) government came to power in Zambia. The tax liability has been reported by the newspapers as of 1 September 2014 to be K8 billion (rebased currency).

This editorial argues that if what is reported by Mr Julius Komaki, a PF official, and echoed by the Daily Nation; Zambia Reports; ZambiaWatchDog; Ms Pamela Chisanga, director of ActionAid Zambia; and former Ambassador Joe Mwale is true, then Zambia is an organized criminal state. The accusations put forth, if found to be true, would mean that the President of Zambia, His Excellency Michael Chilufya Sata; former Justice Minister Wynter Kabimba; current Justice Minister Edgar Lungu; Minister of Finance Alexander Chikwanda; the Director of Public Prosecutions, Mutembo Nchito; the head of the Anti-Corruption Commission (ACC); the head of the Zambia Revenue Agency (ZRA); the Inspector General of Police; and others, along with Mr M’membe, are part of an organized criminal gang. If Mr M’membe is to be charged and prosecuted, all the above personalities and entities must also be prosecuted without exception.

If brought to a court, the case would consist of the following criminal charges or elements of the crimes: conspiracy in committing and to commit the crime of deliberate and willful defrauding of the Zambian people of incurred tax revenues; aiding and abetting Mr Fred M’membe in not paying incurred income tax liabilities; accessory after the fact to the commission of the crime of deliberate and willful failure to pay incurred tax liabilities; conspiracy to engage in and engaging in organized corruption for the purpose of deliberate and willful non-compliance with incurred tax liability; negligence to enforce the law requiring criminal prosecution of law-breakers; political corruption; and other analogous crimes. A massive civil suit for civil conspiracy, economic harm to the nation, negligence, malicious intent not to pay tax liabilities and other analogous torts could also be mounted against the culprits.

The evidence in such a case includes the following, as reported by individuals and media representatives that have been vexed by the failure of Mr M’membe to pay income tax liabilities. These exhibits implicate, above all, the President of Zambia. Exhibit A is a certificate, seemingly from ZRA posted by the Daily Nation, showing The Post’s tax liabilities of billions of Kwacha from 2011, when the PF came to power, to the present. Exhibit B is a statement from Mr Julius Komaki, a PF member, quoted in the Lusaka Times on 9 September 2014: ‘We have always known that The Post newspaper have been avoiding to pay tax since we formed government. We have all the information about their deliberate failure to meet their tax obligations to a number of statutory bodies. We have information that indicate that The Post newspaper is owing ZRA more than K8 billion and that is a lot of money that can do many things to the economy of our country. We now want ZRA to vigorously pursue The Post newspaper so that they can pay so that the money can get into government coffers. They have been claiming that they have not benefitted anything from the PF government and President Sata when there have been lapses in paying tax.’

Mr Komaki would be a live witness to tell the court what and when the PF government knew about the criminality of non-compliance with tax liabilities on the part of The Post and Mr M’membe. With this knowledge, why did the PF not report this to the Directorate of Public Prosecutions (DPP) and the ACC? Mr Komaki is quoted as stating that, ‘it is a crime for a taxpayer not to be compliant’ and that ‘The Post is holding on to government money and that is tantamount to looting…’ Since the PF government had always known, why was nothing done before? Why now?

The Lusaka Times insinuates, based on the interview with Mr Komaki, that there seems to have been a quid pro quo with the future and now President of Zambia, His Excellency Mr Sata, for The Post not to pay tax in exchange for supporting Sata, which certainly aided in his victory over His Excellency President Rupiah Bwezani Banda in 2011. The Lusaka Times states and this would be Exhibit C, and the Lusaka Times editor would take the stand to amplify this statement: ‘The newspaper apparently stopped meeting its tax obligations soon after the PF formed government in 2011 and Julius Komaki says the newspaper had been singing praises for President Michael Sata even when they did not believe in his vision because the owner of the newspaper, Fred M’membe was seeking favours from the Head of State.’ Presumably these favours included not paying taxes in exchange for the newspaper’s support. Mr Komaki and the editor of the Daily Nation would be able to clarify what they meant by and what they knew about these favours. President Michael Sata would take the stand in court and state exactly what favours, if any, were exchanged, and whether they included non-compliance with tax obligations.

President Sata would have a lot to explain to the court: Why did the government of Zambia not do anything about this alleged non-compliance from 2011 to the present? Did the ZRA, DPP, the Zambia Police (ZP) and ACC know about this? If not, why not? If they knew, why didn’t they prosecute? Why did they instead prosecute poor traders from the Common Market for Eastern and Southern Africa (COMESA) and other weak individuals? Who else benefits from non-compliance with tax obligations? Mr Nchito and the heads of other institutions would take the stand to explain. The prosecutor would be an independent lawyer from outside the DPP’s office or the Ministry of Justice because these two institutions would be implicated in the case and one cannot prosecute his or her own case.

Ms Chisanga of ActionAid would take the stand and show her concerns about this massive non-compliance in tax liabilities. ‘I am passionate about [tax non-compliance"> because tax pays for education, health, water and all other social services,’ she told the Lusaka Times. She had other serious concerns which Mr Komaki, the Minister of Finance and ZRA would have to answer on the stand in court. ‘There are a lot of things wrong with all this [Mr. Fred M’membe and The Post not paying taxes and not being investigated and prosecuted">,’ she said. ‘Firstly I wonder where Komaki, a PF cadre, got this information? Why didn’t the Ministry of Finance say anything on this? Why has ZRA been chasing traders at COMESA and leaving out others like The Post in this case.’

Might it be plausible that the President of Zambia, who is consulted and informed about everything in Zambia, did not know about the tax matters involving The Post and Mr M’membe? Was there quid pro quo? Inferentially and circumstantially so, if we go by Mr Komaki’s and the Daily Nation’s insinuations. Further, what does common sense dictate? Did the ZRA know? Did ACC know? Did the police know? Did the DPP know? Did the Minister of Finance know? Were they consulted at all along the way by anybody to not do anything?

Interestingly, M’membe just might come out unharmed if there were to be prosecutions of all the individuals and institutions mentioned above. There are two key elements in a tax criminal case, and it must be asked if this was this tax evasion or tax avoidance? The entire case, and possibly the fate of Mr M’membe, would rest on this question, as tax evasion is a criminal offence, while tax avoidance is not.

Tax evasion is when a person or business hides its revenue so that it does not pay tax and the tax authorities are in the dark about the person or business’s income. The person or business would later be discovered to have hidden their income in order not to pay income tax. They had the mens rea or intent to deliberately not pay income tax, and had committed the actus reus or act of not paying.

On the other hand, if a person or business makes arrangements with the authorities not to pay tax and the authorities know clearly that the person or business is not paying tax as a result of that arrangement, and they do nothing about it, it is not tax evasion, it is tax avoidance. Such arrangements are legal in many jurisdictions, including Zambia.

These concepts are elementary in tax law and litigation. Foreign companies, particularly in the mining sector, don’t pay tax by government arrangement. Is criminality ever applied to such arrangements? Unfortunately, tax avoidance is the norm. Heart-breaking as this concept is, it is the legal reality. Tax avoidance, while still an example of corruption without being tax evasion, is not a crime since it is engaged in with government authorities. A person or business is able to be acquitted if investigated, charged and tried, as long as the person or business introduces evidence that they approached or were approached by the President of Zambia or other authorities and entered into a quid pro quo arrangement, whereby he or the business were not to pay tax and that the arrangement was known by the ZRA, ACC, DPP, Minister of Finance, Minister of Justice or the police, and that these individuals and government departments did not investigate him or the business until they fell out of favour with the government. This is a case that exemplifies the popular saying that ‘law is an ass’. It pretends to be very sensible and reasonable, but all too often it is not. For this reason, law must be distinguished from justice; the two are not equivalent.

This case could be taken out of the criminal field and applied to the civil context. Much more important, however, is that the issue could be taken into the realm of political accountability and governance, in that that the perpetrators of organized state criminality should meet their fate at the altar of the ballot box. Or by impeachment.

Mr M’membe would take the stand and answer the questions put to him: Is it true that you owe K8 billion in unpaid taxes? How did it come to pass that you did not pay taxes since 2011? Did you enter into a quid pro quo with President Sata and other government authorities not to pay taxes? Do you have any documents to show how if any arrangements were entered into? Have you been investigated by the ZRA, ACC, DPP, the Ministry of Finance, the police or others in matters of tax non-compliance?

The tax non-compliance trial of Fred M’membe would be larger than the fate of the man. It would additionally put state organized criminality on trial. The state does not criminally charge a person or business that will turn the tables against them, potentially bringing the state into open disrepute and leading to the loss of an election. How do the president, the ZRA, ACC, DPP, the police, the Minister of Justice and the Minister of Finance defend the charge of organized state criminality under the circumstances of this case, assuming as a fact that Fred M’membe’s Post has not paid income tax since 2011 when President Sata came to power, and given Mr Komaki’s statements that the government had always known about this fact? Fred M’membe will not be prosecuted because prosecuting him will involve the prosecution of the state of Zambia.

* Dr. Munyonzwe Hamalengwa practices law in Toronto, Ontario, Canada. His PhD Dissertation in law was on international individual and corporate criminal responsibility. He is the recent author of The Politics of Judicial Diversity and Transformation.

* THE VIEWS OF THE ABOVE ARTICLE ARE THOSE OF THE AUTHOR/S AND DO NOT NECESSARILY REFLECT THE VIEWS OF THE PAMBAZUKA NEWS EDITORIAL TEAM

* BROUGHT TO YOU BY PAMBAZUKA NEWS

* Please do not take Pambazuka for granted! Become a Friend of Pambazuka and make a donation NOW to help keep Pambazuka FREE and INDEPENDENT!

* Please send comments to editor[at]pambazuka[dot]org or comment online at Pambazuka News.