Monday, December 30, 2013

Don't think Zambians are fools!
By Editor
Thu 07 Nov. 2013, 14:00 CAT

Foreign investors should not think that Zambian people and their leaders are fools. Some of the things foreign investors do raise questions about their respect for the Zambian people and their leaders. It doesn't mean that if some of our people and our leaders are on their payroll, then all the Zambian people are compromised and are incapable of seeing through their schemes and voicing their concerns.

We say this in the light of the conduct of First Quantum Minerals Operations. With regard to their Kashimi Mines, this mine has not been in operation for the last three years. Therefore, their licence was due to be revoked. What do they do? In July, they wrote to the Ministry of Mines, asking for the licence to be transferred.

The permanent secretary in the Ministry of Mines, who is also a director of First Quantum Minerals Operations, put in a request that the transfer be done quickly so that they don't lose the licence. The conduct of the permanent secretary in this matter is highly questionable.

It is not difficult to see what their hidden agenda is. First Quantum Minerals Operations is today suing the Zambian government with respect to Bwana Mkubwa Mine, which is a non-operational mine, to get a ruling that they can then apply to their cash cows - Kansanshi and Sentinel.

First Quantum Minerals Operations is afraid to sue the Zambian government directly under Kansanshi as the development agreement for that mine comes to an end in 2015. And they have only paid US$500,000 in taxes for that mine. So if First Quantum Minerals Operations sues under Kansanshi and they win, all the Zambian government will be liable for is US$500,000, which they can easily recoup after 2015 by hitting them with the same tax rates as other corporate entities. In this case, they will stand to lose even more.

In regard to Sentinel mine, it is shocking that First Quantum Minerals Operations can sue the Zambian government and while doing so, this same company is asking this same government for favours - they are asking the Zambian government to relocate people.

Their main interest in all this is Sentinel mine - their most prized possession. This calls for increased vigilance on the part of the Zambian people and their leaders. And there is need to demand utmost transparency from the government in its dealings and agreements made in regard to this development. The Zambian people should understand every agreement made, unlike in the past where these development agreements were kept under lock and key.

And it's clear that First Quantum Minerals Operations are far from being clean in their operations as they try to claim. The tax arrangements of First Quantum Minerals Operations deserve scrutiny.

It may be necessary to investigate how they have been using the duty-free facility for the importation of new equipment. For instance, is it permissible for them to use new equipment imported duty-free for Kalumbila operations in Kansanshi Mine and transferring the old Kansanshi equipment to Kalumbila? Similarly, is it acceptable for them to import duty-free equipment for Bwana Mkubwa and use that same equipment for Kansanshi Mine and use the resulting capital allowances to reduce taxable income from contract mining? Is it right for First Quantum Minerals Operations to use the Bwana Mkubwa mining agreement to get tax breaks for Kansanshi Mine, which is regulated by a different development agreement? These are questions that deserve honest answers from First Quantum Minerals Operations and from the Zambian government, especially the ministries of mines and finance.

It is clear that some mining corporations are not acting with honesty; they are not sincere in their dealings with our government.

It cannot be denied that these corporations have very deep pockets and as a result of this, they can buy their way into anything. They can even buy some weak souls to defend their wrongdoings. We therefore need the help of the international community if we are to harness our mining resources for human development. We need the help of the international community to create a global environment that fosters great transparency in the operations of mining transnational corporations.

Far more than increased aid, what we need is strengthened international co-operation to help us secure a fair share of the wealth from our mineral resources now beingdrained out through unfair and sometimes illegal practices.Tax evasion is a global problem that requires multilateral solutions. We cannot combat this type of tax evasion on our own because the systems that allow transnational corporations to under-report tax liabilities operate across borders.

The extensive use of tax havens, shell companies and multi-layered company structures operating across tax jurisdiction creates an impenetrable barrier of secrecy.

We know that tax authorities in all regions struggle to prevent the erosion of their tax bases, but we struggle more than most. That is partly because of the restricted human, technical and financial resources available to revenue administrations.

But this is also because the transnational corporations involved in our mining sector are highly integrated and make extensive use of offshore centres and tax havens with limited disclosure requirements. These are ideal conditions for tax evasion through mispricing.

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