(STICKY) Mopani dismisses tax audit report
COMMENT - 'Flawed and incomplete'? They refused to cooperate.Mopani dismisses tax audit report
By Chiwoyu Sinyangwe in Lusaka and Kabanda Chulu in Kitwe
Wed 23 Feb. 2011, 03:59 CAT
MOPANI Copper Mines Plc has labelled as “flawed and incomplete” a recent pilot audit, which revealed glaring irregularities and inconsistency in production and revenue figures it submits to ZRA for tax administration.
But while refuting the audit, Mopani Copper Mines Plc chief executive officer Emmanuel Mutati, however, failed to address the fundamental findings of the exercise carried out by lead auditors - Grant Thornton Zambia - and Econ Pöyry, a Nordic branch of global consulting and engineering company.
Mutati in a press release “refuted the conclusions” of the findings of the audit most of which hinged on its links to its parent company, Glencore AG, which resulted in massive transfer pricing.
“We refute the conclusions this draft report contains,” Mopani said in a statement issued by Mutati.
“It pilot audit report is based on broad and flawed statistical analysis and assumptions. From the outset, the draft report fails to recognise that Mopani is a tolling facility where 50 per cent of the copper it produces comes from its own mines and the rest is made from third party concentrates. This failure explains the inconsistent results and is one of the main reasons why the draft report has been unable to reconcile figures.”
However, Mutati did not address the fundamental findings of the pilot audit in the statement issued yesterday.
Mutati claimed that Mopani had always been open and transparent in its finances with the authorities, contrary to open complaints by the audit team that during its exercise, it found that MCM resisted the pilot audit at every stage while most queries went unanswered.
Other findings of the audit Mutati failed to address in the response included findings that the Mopani's bookkeeping was incomplete, several legally required documents were lacking and that the general ledger analysis showed several loopholes and couldn’t be matched with the trial balance.
The auditors also found an inexplicable doubling in the costs of the company between 2005-7, which showed that the company has been artificially inflating its costs to minimise the profits shown in their books so as to pay less taxes.
Mutati instead condemned the leaked audit report which was issued by The Post after both the government and ZRA elected to keep it secret.
He claimed that the findings of pilot audit were “false allegations,” whose contents were damaging to the reputation of Zambia and the local mining industry “which is vital to our economy.”
Mutati diverted further from the findings of irregularities at the Mufulira and Kitwe-based mining units, but instead highlighted a catalogue of corporate social responsibilities activities Mopani had engaged in over the past decade of operating in the country, including charities.
He claimed Mopani had invested over US $1 billion in its operations in the country, investments in education, employing 15,000 people as well as running one of the largest antiretroviral programmes in the country.
Mutati said Mopani was disturbed by the release of the document which was kept secret.
“We have also been audited by independent auditors annually,” said Mutati. “Every year, the independent auditors' reports have given a clean bill of health. Both the government and ZCCM – IH have seats on our board with full access to information and participation in decision-making.”
The pilot audit concluded that “the Mopani cost structure cannot be trusted to represent the true nature of the costs of the Mopani mining operation.”
The audit revealed that Mopani's parent company, Glencore AG, the purchaser of its copper, determines prices and that some copper from Mopani was sold under an “old” contract with copper in one instance being sold at 25 per cent of official prices at LME.
“The agreement is entered into with Glencore UK Limited, but the actual sale transactions disclosed are, as far as we have been able to verify with Glencore International AG,” the audit revealed.
And Christian Aid has challenged the European Investment Bank (EIB) to urgently investigate the irregularities highlighted in the Mopani tax audit because tax abuse was against European development policy.
Mopani Mines is the recipient of a 48 million Euro loan from the EIB, which is owned by EU member states.
Mopani obtained the loan in 2005 aimed at rebuilding and modernising the Mufulira copper smelter.
“We challenge the European Investment Bank to investigate this issue urgently and if necessary, review its lending practices because a subsidiary of one of the world’s largest commodity trading companies stands accused of a series of tax irregularities in Zambia, a desperately poor developing country where life expectancy is 47 and tax revenues are urgently needed,” Christian Aid senior economic justice adviser David McNair stated.
Christian Aid Zambia partners, Centre for Trade Policy and Development executive director Savior Mwambwa said the auditors’ report appeared to confirm the claims of Zambian civil society that mining companies were depriving the people of Zambia of social and economic benefits that were rightly theirs through tax evasion and avoidance practices.
“This is a wake-up call to the Zambian government to do a financial audit of all mining companies, so that the Zambian Revenue Authority can update its assessments of the tax owed,” said Mwambwa.
Mopani Copper Mines Plc is a Zambian registered company, with Glencore International AG owning 73 per cent of the mine through one of its subsidiaries.
The audit report says that Glencore’s ownership is through Carlisa Investments Corporation, which is incorporated in the British Virgin Islands.
Labels: CORRUPTION, MOPANI, TAX EVASION, WINDFALL TAX, ZRA
posted by MrK @ 6:26 AM
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