Sunday, December 15, 2013

SI 89 cannot be defended
By Editor
Thu 31 Oct. 2013, 14:00 CAT

IT will require the courage and tenacity of Michael Sata to deal with the mines and enable our people to get a fair deal. Mining corporations are too powerful and manipulative. They are able to get whatever they want and when they want it. Very few African governments are able to stand up to them.

Mining corporations buy some of our best brains and most influential citizens and make them their agents, representatives, advisors or consultants. These are the ones who lobby for them. In some cases, they even pay ministers of government to protect and promote their interests.

It is therefore not surprising that when the interests of mining corporations are threatened in any small way, the first ones to speak for them, to defend them are our very own best people - our best mining experts, economists, lawyers and so on and so forth. Even some politicians start to speak as if they are representatives of mining transnational corporations and not the people; they speak as if they are directors or chairmen of the board of directors of these corporations. There is no doubt many of our people, experts live off these mining companies and they are ready to sell or sacrifice the interests of our country and our poor people for the allowances or salaries they receive from these corporations.

And this explains why our entire Ministry of Finance could sign such a clearly questionable Statutory Instrument giving First Quantum Mining and others the right to export unprocessed minerals with duties waived. For the peanuts they are receiving as allowances, salaries or kickbacks, they are ready to make their own country lose such gigantic amounts of revenue.

We are told that our Minister of Finance just signed that Statutory Instrument without fully understanding it on the recommendations of the Zambia Revenue Authority. If this was the case, then those responsible at the Zambia Revenue Authority need to be made accountable and pay for their dishonesty, deception. But the minister will also have to explain his negligence. We say this because it is negligence to sign such an important Statutory Instrument without reading it or understanding what it is about. If this is the way our Ministry of Finance works, then there is a serious problem in that ministry. We doubt this.

We don't think what happened was a product of oversight. We believe that these actions were not a product of oversight nor were they unconscious, but rather that they were deliberate and conscious. All those involved in this issue simply allowed themselves to be blinded by personal interests and benefit. If one is honest, truly honest, one can't enter into such a deal. Michael is not an economist or a tax expert. But that does not inhibit him to see that something here is wrong, something here is not right. Anyone who is honest will not fail to see that something here is amiss. Let's forget about economic, business or tax jargon. Let's talk straight language that everyone understands.

And when something is wrong, it is wrong no matter what language or jargon we use. It is not about bombastic words, it is simply about things being right or wrong. And what was done was wrong and Michael was correct to correct it.

We have to be self-critical and unassuming. Let's examine everything we do, checking to see whether it is correct or not, whether or not we have let ourselves be carried away. It is not about who produced that Statutory Instrument and signed it. It is simply about it being wrong, and reeking with corruption in every pore.

We all know that taxing mining transnational corporations has not been easy for our poor countries in Africa. In most cases, mining companies have resolutely opposed the progressive, fair and just tax reforms our governments have come up with, threatening to invoke "stabilisation" clauses written into the agreements they negotiated with our governments in the 1990s.

We have not forgotten how the mining transnational corporations behaved when our government sought to renegotiate its royalty rate on copper exports. They opposed the measure despite a four-fold increase in the price of copper between 2000 and 2011, and the very low effective tax rates that they were paying.

But opposing balanced tax reforms is not in the best interests of the mining corporations themselves. Our governments need a fair stake in mining revenues to invest in the infrastructure that the mining transnational corporations themselves require. Our governments also need the revenues to share mining gains with citizens who might otherwise see mining activities as benefitting only a privileged few foreign investors and the national elite - a perception that is unlikely to foster a stable environment for investment.

We know that the mining corporations will always argue that there is nothing illegal they are doing and that they are not evading tax but are simply engaging in tax avoidance, which is legal and permissible. But we also know that tax avoidance is a matter of major global concern today. Governments - and societies - can only function if the individuals and companies who benefit from wealth generation, public investment and public goods share in the cost of financing. In Europe, there is increasing public anger directed towards highly visible multi-billion dollar corporations that minimise their tax liabilities through sophisticated but aggressive "tax planning".

Our poor countries are highly vulnerable to aggressive tax planning and sometimes even tax evasion facilitated by the extensive use of offshore companies, the high levels of intra-company trade and the commercial secrecy surrounding foreign investment activity. Our governments lack the human, financial and technical resources needed to secure tax compliance, and the commercial market intelligence needed to assess company tax liabilities. As a result, we are losing significant revenue streams.

Our transnational mining corporations can minimise tax repayments in several ways. Some are legal, some are illegal, and some are in the grey area between the two; and all are difficult to detect.

In 2008, the Zambia Revenue Authority engaged an international tax accounting team to audit selected mining companies, including Mopani Copper Mines. The main shareholder in Mopani Copper Mines is Glencore, the world's largest commodity trading company, which holds a controlling stake through Carlisa Investments - a company based in the British Virgin Islands owned in turn by Glencore Finance (Bermuda). The audit report noted that Mopani Copper Mine was selling copper to Glencore, which is registered in the town of Zug, Switzerland, at prices far below those on the international markets - a practice that the team identified as plausible evidence of transfer pricing.

Glencore executives strenuously denied wrongdoing. However, the European Investment Bank, which had extended a loan to Mopani Copper Mine, expressed "serious concerns about Glencore's governance".

Attempting to estimate the overall losses associated with mispricing has been described as an exercise in night vision. One of the most detailed analytical studies, carried out by Global Financial Integrity, put the average annual loss to Africa between 2008 and 2010 at US$38 billion. To place this figure in context, it was slightly higher than the flow of development assistance to the region over the same period. Put differently, Africa could double aid by eliminating mispricing. Another US$25 billion is said to be lost through other illicit outflows.

In saying all this, we are not in any way attempting to paint anyone black. We are simply trying to state that which needs to be stated in the clearest and most honest way possible. If we could be ripped off in this way, what more when we start to allow mining corporations to export "soil", as Michael intelligently and simply put it!

When we allow these mining corporations to export "soil", instead of processed minerals, it is impossible for us to know exactly what is being taken out of the country in terms of mineral content and quality.

This is the most reckless way for a country to give away its income, its revenues. Yes, we are desperate for money. But this desperation shouldn't drive us to do silly things like these.

Michael's anger over this issue is understandable. Any responsible leader of one's people would feel and act the same. It is not Michael's action that is going to make this country lose money. It was the action of the Ministry of Finance that was going to make this country lose gigantic sums of money. Michael's intervention, contrary to what is being said, is not going to lose us money, it is going to help us save money as a country.

Clearly, these issues need eternal vigilance and an incorruptible spirit. And only those who are incorruptible, those with a strong public spirit should be brought somewhere near these activities.

Again, what spirit moves us to make these criticisms? Do we do this to bring about a change of opinion, to create an unfavourable opinion in regard to those citizens serving at the Ministry of Finance and the Zambia Revenue Authority? No, never. On the contrary, we do not wanting to expose so many good public servants at the Ministry of Finance and the Zambia Revenue Authority to blame and to the scorn which bad decisions will expose them. And this is because such bad decisions bring discredit and tend to spread. And they tend to make the masses regard all those serving in these institutions as bad people.

We make this criticism simply to overcome these bad decisions so that our government and those who run it free themselves from the consequences of such bad decisions.

We believe that our public servants, including our politicians, serve the cause of the people to the extent to which they work well, to the extent to which they are sincere, to the extent to which they are honest, to the extent to which they eradicate lying from their work, and to the extent to which they eliminate deceit in their work.

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