Maravi

Mopani is dodging taxes - CSOs

COMMENT - This is an excellent development. Mopani should be prosecuted for criminal actions. If the MMD refuses to do it's duties (or a PF-UPND would take the same attitude), not only should all donor aid be suspended, but there should be international criminal charges of fraud and embezzlement against the MMD leadership.

Mopani is dodging taxes - CSOs
By Chiwoyu Sinyangwe
Thu 10 Feb. 2011, 04:00 CAT

MOPANI Copper Mines (MCM) is dodging taxes in Zambia, says a consortium of European-based and local civil society organisations.

And the organisations have questioned finance minister Dr Situmbeko Musokotwane’s continued silence on the audit report given to him last year which revealed the glaring irregularities in production and revenue figures at Mopani.

A pilot audit which covered activities of the mine from 2006 to 2008, conducted by tax specialists Grant Thornton and Econ Pöyry of Nordic region, revealed glaring inconsistencies in production and revenue figures Mopani submits to the Zambia Revenue Authority (ZRA) for tax administration, the numbers the report said might not be "trustworthy."

The irregularities at Mopani hinge on its relationship with its parent company, Glecore AG, of Switzerland and cover practices such as alleged transfer pricing, inflated operation costs, outright under-pricing of copper for exports and irregular hedging practices.

Commenting on the revelations which also observed that the government lacked capacity to verify figures submitted by mining firms to ZRA, the civil society organisations called for immediate recovery of all lost tax revenue, with interest, from Mopani and other mining companies who might be found wanting by the ongoing audits.

The organisation which comprised Oxfam, Counter Balance, Eurodad, Tax Justice Network and Centre for Trade Policy and Development (CTPD) stated that additional fines should be imposed on mines not cooperating with government’s audit efforts.

“Mopani Copper Mines, a Swiss-owned mining company, funded with EU development monies, is siphoning its profits out of Zambia without paying taxes. Instead, it is putting the money into a tax haven, Switzerland. Mopani Copper Mines is dodging taxes in Zambia,” the organisations stated.

The organizations also questioned Dr Musokotwane’s inertia to act despite being given the report last year in which auditors expressed frustrations in carrying out the exercise which was within provisions of Zambia laws.

“The auditors found that MCM resisted the pilot audit at every stage. The company’s book-keeping was incomplete, several legally required documents were lacking and the general ledger analysis showed several loopholes and couldn’t be matched with the trial balance,” the organisations stated.

“The auditors also found an inexplicable doubling in the costs of the company between 2005 to 2007, which shows that the company has been artificially inflating its costs to minimise the profits shown in their books so that they could pay less taxes. Despite the fact that the audit was finished in the fall of 2009, it was kept secret.”

The organisations also called for implementation of all recommendations contained in the audit report to be applicable to all mining companies.

“A complete reform of the mining tax regime to enable ZRA enforce simple and easy to implement taxation system,” demanded the organisations.

“The donor community should support Zambia to increase ZRA’s capacity to undertake financial audits and undertake a fresh tax assessment for all mining companies.”

And Centre for Trade Policy and Development (CTPD) executive director Savior Mwambwa said the audit confirms fears that mining companies were depriving the Zambian people social and economic benefits that were rightly theirs through tax evasion and avoidance practices.

Mwambwa said the country’s revenue collection from the mining sector should pre-occupy the people of Zambia and politicians in this year's election campaigns.

“This is a wake-up call to the government of Zambia to undertake an industry-wide financial audit of all mining companies for the purposes of the Zambian Revenue Authority updating its tax assessment for mining companies,” said Mwambwa. “Mopani should be penalised by heavy fines plus tax payments with interest, failure to which its operating licence should be suspended.”

Mopani which operates mining units in Kitwe and Mufulira is 73.1 per cent owned by the Swiss commodity trader, Glencore AG, and the firm received a 48 euros million loan from the European Investment Bank.

Labels: CORRUPTION, CSO, GLENCORE INTERNATIONAL AG, MCM, MOPANI, SITUMBEKO MUSOKOTWANE, TAX EVASION

posted by MrK @ 7:46 AM