A unique treaty between the Netherlands in Uganda has led to dozens of international companies using a Dutch holding company to avoid paying tax, the Volkskrant reported on Friday.

The treaty, dating back to 2004, ensures that Dutch companies doing business in Uganda don’t have to pay any tax on dividends – which should be taxed at around 15%.

The treaty was signed in the hope it would stimulate Dutch firms to invest in the region, and that the loss of tax income would be offset by the extra investment. In practice, however, it stimulated tax avoidance on a wide scale.

Indian telecoms company Airtel, for example, pushed almost €170m in dividends through the Netherlands over the past three years, allowing it to avoid paying some €21m in tax in Uganda, the VK said.

That money could have paid for 20,000 teachers for a year, anti tax avoidance campaigner Regina Navuga told the paper. ‘Tax avoidance is morally disgusting,’ she said. ‘It strengthens the global ‘winner takes all’ system.’

French oil firm Total also uses a Dutch limited company to avoid paying tax in Uganda, the paper said.

According to figures from Dutch central bank DNB, of the €1.5bn invested by Dutch companies in Uganda in 2019 on paper, just 0.2% was actually of Dutch origin.