ActionAid Zambia has accused Glencore-owned Mopani Copper Mines of trying to force the government into relaxing its VAT rules by suspending its zinc operations and cutting 169 jobs in Zambia amid a $600m row over VAT refunds to the country’s mining companies.
In a statement released to the media, ActionAid Zambia Director Pamela Chisanga said that the VAT rules provide the government with an important tool for tackling tax avoidance.
Below is the full statement
ActionAid Media Statement
06 October 2014
Glencore accused of strong-arming Zambian government over tax row
“Glencore’s decision to halt its zinc operations and cut jobs in Zambia looks like a shameless attempt to strong-arm the government into relaxing its VAT rules, which provide the government with an important tool for tackling tax avoidance.
“The Zambian government has every right to demand companies prove they aren’t avoiding taxes by selling the country’s assets at reduced prices. Zambia is one of the world’s poorest countries and desperately needs tax revenues to build public services and grow its economy.
“Exporters like Glencore claim to have legitimate objections to Zambia’s VAT rules, but they must not try to force the government’s decision through these heavy-handed tactics. The government should stand firm and ensure that some of the world’s biggest mining companies, pay their fair share of tax.”
Mining companies and other exporters have opposed current rules that require them to provide documentation of the receipt of exports in order to receive VAT refunds from the government. This documentation can be used to identify whether exports are under-priced, a common tool for avoiding taxes.
Mining companies in Zambia have said it is impractical for them to implement the rules, and note that whilst they have been in force since 1997 the government has only sought to enforce them since 2013. Campaigners in Zambia have countered that the mining companies have provided no explanation as to why it was difficult for them to disclose the documentation required.
In the upcoming national budget, the government may decide to scrap the current requirements in response to opposition from exporters, including the mining companies.
The UK-Swiss mining giant’s operations in Zambia have long been highly controversial, following a leaked audit of its Mopani mine which alleged the company had been under-pricing its copper exports in order to avoid taxes. ActionAid estimates that this one company’s tax dodge could have cost Zambia up to £76 million in one year alone – more than Zambia receives in UK aid each year.
ActionAid wonders why the report done by the European Investment Bank (EIB) on these allegations has not been publicised even when various stakeholders have been pressurising the EIB to release even just the abridged version. ActionAid therefore calls on the EIB to immediately make public the report on Mopani and further requests the Delegation of the European Union in Zambia to assist in getting the report released so that Zambian citizens and stakeholders are informed of the outcome of the investigation.
The legislation in Zambia on exporters is crystal clear in terms of input VAT. This tax is paid by the exporter to the supplier who in turn declare it as output tax to the ZRA. The other portion and the bulk of the exporters (mines) input VAT in paid at the borders as Import VAT. This too is collected by the ZRA.
Mines and other exporters are ZERO rated. They therefore do NOT bear any VAT obligations for consumption of goods and services (local) or indeed on imports. That is the current LAW.
What ActionAid should be doing is not to demonise mines whose VAT refunds are illegitimately being withheld but challenge the Government to change the legislation and make the mining and export sectors VAT EXEMPT ie. illegible to bear the cost of INPUT VAT and thus have a higher cost base.
With this high cost base, it remains to be seen if these mines and exporters will be able to compete internationally where they are price takers against other producers worldwide who do not have the VAT (input tax) burden.
Will more investors who would like to set up export oriented manufacturing firms set up base in Zambia if their products will have the burden of input VAT?
That is the policy decision any Government will have to grapple with.
Who cares.
Vat is optional not mandatory.
Thanks.
@Salamat
We do not need to grapple with nonsense.
Common sense is to nationalise if we give away revenue of at least £76M and then get Foreign Aid less than that (which we then pay back in kind by these sort of overly generous gestures on on our copper)!
We are in a vicious cycle. We can’t thrive on Investor run Industry, because we are losing Revenue which is replaced by Aid. This beggars belief. Our MPs and gov’t officials like Chikwanda, Chipimo et al, all benefit more from our copper than the poor of Zambia, by their private concerns(enabled by us). The current law as you state it is therefore a ‘Thiefs’ charter.
I doubt that the Swiss/UK. Governments would allow such in their countries. Recently Pfizer failed to sell because they found offers risible. Acumen…
Rüschlikon is a village in Switzerland with a very low tax rate and very wealthy residents. But it receives more tax revenue than it can use. This is largely thanks to one resident – Ivan Glasenberg, CEO of Glencore, whose copper mines in Zambia are not generating a large bounty tax revenue for the Zambians. Zambia has the 3rd largest copper reserves in the world, but 60% of the population live on less than $1 a day and 80% are unemployed. Based on original research into public documents, the film describes the tax system employed by multinational companies in Africa.
https://www.youtube.com/watch?v=WNYemuiAOfU
It was only Friday that a blogger and (Obviously a PF useful…..) going by the name of Chindakwanda – Galileo xxxx was busy ranting and singing praises about PF Govt following an article about Zambia being the highest destination for FDI among landlocked countries. My contribution was that these very foreigners were only “stealing” twice and more of the same FDI while dangling carrots at our elected MP’s and peanuts to the Zambian labour force and excluding Zambians from participating in any meaningful business opportunities. I was insulted by the gullible for failing to see why Zambian voters are praising the PF. Today we have this exposure and anyone who thinks that these investors have any interest in the welfare of Zambians or the economy is a dull and gullible.
Lets give moneybags Glencore ????a good send off????.
But Africans ndise bo pwalala……
£70 Million loss per year. What a loss…..!!! Then the Western come & say we r giving Aid……!!
Africans !!!
They are only giving us back our money! These white gov’ts are really cynical and have no respect for Africans.
Our leaders fall into capitalist arrangements with these countries by setting up mining firms to their own benefit, and get more of a share from the mines than citizens who vote them in.
This is a second vote loser for PF, after Constitution.
That softex woman always just make calls on investigations. What are investigations reports for? Why can’t she just walk-in Mr. Chikwanda’s office and ask about VAT?
I don’t understand what these protests are for.
Can all the mine owners pack and go. We dont need them. We can leave the minerals for our children’s children who may be more sane than the current leadership to manage this wasting asset.
@ Watu. Concur.
We can’t do this. It is not worth it. We the citizens must tax our gov’t to hell and back on our mining revenues, or lack of Revenue.
It makes sense to run our own mines, no matter the cost or lack of latest technology. We must know ‘something’ of mining after 50 years surely.
This problem with the mines is truly insane, inane………ooooooh more adjectives please!
READ BELIW, UK standards onforeign bids on its industries
AstraZeneca’s refuses US Pfizer bid on grounds:-
The Unite union said that the company’s independence was not secure and the government should act to protect certain businesses:-
“The government needs to use this time to intervene and put a public interest test in place for proposed takeovers of this size, just as other governments do, such as the French which has strengthened its powers to act to protect strategic industries.”
We in Zambia are doing the same with our mines. Protecting our mining industry from poor investor activity that weakens our Revenue collection. We should not allow our copper industry to be run by UK/SWISS mine conglomerate without protection. If PF fail this, Zambians should vote…
READ BELOW . It should say.
Also at end should read:
If PF fail this, Zambians should vote differently.
Their is too much misunderstanding on vat rule 18,this rule has been in existence since 1997,but in 2013, 2 subsections were added,1,documents proving the final buy ,not the middle company,2,the funds of exported minerals should be deposited in Zambian bank account.these are what mining companies say it’s not possible to do.its like telling those Indians dealing in wholesale shops to provide proof of the final consumers of the groceries,was the law made by an act of parliament?
Look we all agree on errors in the technical construction of the law. It was deliberately set to allow Theft.
But we made those additions and they must be obeyed. We want to protect our strategic industries. We want Revenue not Aid or a Debt.
The best is to send all these investors away especially Glencore. Never to return. We mine ourselves as best we can to provide jobs and income to families.
Aaaaaarrrrrrggghhhhh!!!!!!!!!! Sick and tired of this now.
Sick and tired because you have a full belly mate.
It is for others poorer than you we fight.
Look, all we are doing is providing jobs to our miners. Which is good. But we are not making Revenue. We are getting Aid, Loans and have increased our debt to pre debt cancellation levels.
So what is this about. AND don’t say sustainable Debt, that is just careless politics and economics. Once again the Poor have to pay for this because they suffer more. We can’t bring them to standard. No bursaries for educating poor.
That copper is best nationalised. Right now, all the employed miners are just digging holes and filling them up again with no gain to Revenue. Miners paid pittance and the high stakes are for investors.
STOP THIS generational mismanagement of mines by successive gov’ts in Zambia.
Zambians easily forget. We nationalised the mine and we ground them to the ground. We started sustaining them with our tax. We sold the mines because nationalisation completely failed . We cannot afford to go back to a failed experiment.
i concurr with salamat.if indeed the government and citizens are sd abt this thing,its better we change the rules to suit us since this our country…
fools be sharp.
It is a well known fact that ALL mining companies in Zambia sell copper and cobalt to an intermediary abroad, (normally a subsidiary), at a knocked down price. That agent abroad, once out of Zambia’s jurisdiction, sells the metals at the LME ruling price. The former plant manager at Luanshya, a Mr JC, discovered that Enya Holdings (the owner of Luanshya and Chambishi at the time) were selling cobalt to a warehouse in Johannesburg. He discovered this while on a company visit to South Africa. On his return to Luanshya, he leaked that information to the union…HE WAS IMMEDIATELY DISMISSED. We know that Glencore is the world’s LARGEST METALS TRADER, followed by Traffigura. Many Zambian mines sell through Traffigura. THESE ARE ALL PLOYS, CONTRIVED TO DEFRAUD ZAMBIA OF REVENUE!!! BE WARNED!!!
We know and are desperate! But this is a mafia situation with capitalist neo colonialists in Zambia collaborating with Glencore. Even the opposition leaders are silent on this. Why are they not wanting to get a bigger share for us. Only citizen action will show them how angry we are. It is a crazy situation! Its a wide corruption.
Sable zinc has just run-out of feed material ,due to ban of copper conc exports from the DRC not this tax issue you are talking about.
Oh yipee. Does it mean they are going to be leaving as the situation is no longer under their control? Its all part of blackmail. These investors are hold us by the neck creating these crises’. You can’t allow this type of power to these people. They are mercenaries.
@evaluator tell them my brother,this Zambian crooks who side with the big business men should be vicious in getting knowlledge about the crooks they defend!Big business is composed of unethical characters!Remember Enron or World com!
#patriot abroad# and your ilk, you now have your golden opportunity to walk your talk. Now mobilise yourselves and buy that kabwe mine and while you are at it ask that Yaluma to prepare you financial plans foregoing input VAT refund and let us see how long you will last. KK. is not dead, go and ask him about nationalisation.
Zambia’s is well known for its copper traces of diamonds nickel and others Do we know the annual revenue for each commodity mined e.g. coal gold iron and other metallic minerals
If so then what is the operating expenses for mining firms E.g
payments to
contractors and employees consumables
mining supplies
utilities exploration
royalties
transport cost
metal purchases and ore from other mines
Do a revenue analysis on above as a proportion on each mineral mined and sold on that mine Look at taxes charged and review
Make a confirmation and compare documents
If still in difficult recheck with application of Australian,argentina,us or Canada resource tax system and not any other and modify…