Mopani’s tax issues provoke debate
The Post Online, February 13, 2011

TAX payment irregularities revealed by the audit report at Mopani mines has silenced all arguments against the reintroduction of a simplified mining revenue collection system such as the windfall tax, says Dr Fred Mutesa.

And Consumer Unity and Trust Society (CUTS) International has called for an industry-wide audit to be conducted in the mining sector to ascertain the true extent to which companies are evading taxes and how much Zambia has lost so far.

Meanwhile, Nkana PF parliamentarian Mwenya Musenge has challenged finance and mines ministers, Situmbeko Musokotwane and Maxwell Mwale, respectively, to stop acting as if they ‘know it all’ because their mining policies had failed resulting in Zambia losing millions of dollars.

Commenting on revelations of tax payment irregularities and inconsistent production figures that are submitted to the ZRA, Dr Mutesa, who is Zambian Empowerment for Development (ZED) president, said the right thinking Zambians had been vindicated for calling for fair and equitable taxes from the mines.

“If not properly checked, multinational companies such as Mopani and many other mines will continue to under invoice and under price for purpose of tax avoidance and evasion. So it is time to come up with a tax regime that is easier to enforce and collect revenue and also to compel the mines to do more on corporate social responsibility since copper is a waste asset and soon we shall very negative environmental liabilities,” Dr Mutesa said.

And CUTS stated that the irregularities reveled at Mopani mines were just a tip of an iceberg of how much more dirty business was going on in the mining industry. It stated that the government should own up on the basis of the revelations and carry out an industry-wide audit to ascertain the true extent of the tendencies to evade taxes as the only way to ascertain how much the country had so far lost in taxes.

CUTS further stated that the government should treat the revelations as a wake-up call to institute measures that would not only address the glaring revelations but end the abuse of the country's resources especially in the mining sector.

It urged the government to stiffen regulations under the Extractive Industry Transparency Initiative which will compel the mining firms to release timely and accurately financial figures.

“There is no doubt that the weaknesses of Zambia Revenue Authority have been exploited and a lot of money siphoned out of the country through methods such as deliberate failure to appreciate the tenets of transfer pricing and through accounting manipulation. This is a clear sign of tax avoidance and evasion and this should be a wake-up call for the government,” CUTS stated in a press release.

CUTS also called for the reintroduction of the windfall tax.

“It is common knowledge that profit based tax system are a problem given the capacity of the Zambia Revenue Authority hence the urgent need to revert to volume and sales based taxes,” CUTS advised.

It stated that mining firms had continued to make profits even at the expense of the consumers’ health .

“Not long ago, Konkola Copper mine polluted the Kafue River for the second time putting the health of workers and consumers at risk. It is important that we take a courageous step on our natural resources and we must realize that Zambia will only develop from its natural resources, copper being the main product,” stated CUTS.

Mopani operates mining units in Kitwe and Mufulira is 73.1 per cent owned by the Swiss commodity trader, Glencore AG.

And Musenge said the MMD government and its ministers should listen and realise that Zambians had been given a raw deal by the so-called mining investors.

“The unpleasant thing is that we have lost money because of the adamancy by Situmbeko and Mwale who insist that the mines are not making profit,” said Musenge. “In 2008 during debates to amend the mines and minerals Bill, I proposed the establishment of a Minerals Accountability Directorate which should monitor from extraction to finished products and come up with independent figures and then advise ZRA on how much to collect as revenue since ZRA lacks capacity to genuinely tax the mines.”

Southern Africa Resource Watch (SARW) Zambia Representative Edward Lange said irregularities revealed in the audit report were a clear indication that Zambia should quickly be part of the Extractive Industries Transparency Initiative (EITI) where the mines would be compelled to publish how much they paid in taxes.

“If The Post did not publish this report, we wouldn’t have known about it and it shows the arrogance and hostilities which these mines have towards Zambia because they have government backing. And time to build the capacity of ZRA is now so that we avoid losing out,” said Lange.

Government with support from co-operating partners commissioned a pilot audit conducted by Grant Thornton and Econ Poyry of Norway, that revealed inconsistencies in production and revenue figures Mopani submits to ZRA for tax administration. Dr Musokotwane has not acted on the findings of the report despite receiving it in August last year before the budget announcement.

This news can also be viewed at:

http://www.postzambia.com/
http://zambia24.com/