What USD 196 Million a Year Could Have Meant for Human Rights & SDG indicators.
When revenue leaks, development stalls
Every year, governments make difficult choices about which schools are equipped or built, which clinics are staffed, and which communities gain access to safe water and electricity. In low- and middle-income countries, these choices are often constrained not by a lack of need or ideas but by a shortage of public revenue. New research on Zambia brings this reality into sharp focus.
A recently published study estimates that Zambia lost nearly USD 196 million every year (US$940 million between 2014 and 2020) due to corporate income tax and VAT noncompliance. This figure does not represent new taxes or higher rates; rather, it reflects revenue that could have been collected under existing laws but was not. Over time, this type of leakage quietly undermines development, forcing governments to rely on borrowing, aid, or austerity rather than on sustainable domestic resources.
The study estimates that between 47% and 55% of the potential tax revenue from audited firms in Zambia went uncollected during the study period. Using detailed tax audit data combined with statistical and machine learning models, the authors extrapolate evasion patterns from audited firms to a wider tax base. The difference between the predicted potential revenue and actual collections represents the tax gap.
When aggregated, this gap amounts to approximately USD 196 million per year in terms of foregone government revenue. Much of this loss is concentrated in corporate taxation, particularly in sectors with high profits and complex tax arrangements.
However, what if the USD 196 million had not been lost annually within the study period? What if it had flowed into Zambia’s public budget year after year?
Using the Government Revenue and Development Estimations (GRADE), we translate these revenue figures into concrete development outcomes, and the results are striking. The GRADE tool was designed to answer a simple but powerful question: What does additional government revenue mean for people’s lives?
GRADE links changes in government revenue per capita to progress across key development indicators aligned with the Sustainable Development Goals (SDGs), including: Access to basic and safe water, access to sanitation, school attendance and education outcomes, child and maternal survival.
What USD 196 million a year could have meant for Zambia
To put the number in context, we quantified the impact of the USD 196 million lost in 2019 for development outcomes, representing a meaningful increase in government revenue relative to Zambia’s population size. According to GRADE estimates, a sustained increase of this magnitude could support significant progress across multiple development sectors.
Note: $196 million USD in 2019 was to constant 2015 USD as required by the model. The GRADE simulations assume that expenditures will continue to be allocated as in past decades.