Vedanta Resources Plc (VED)’s Zambian unit is suing the Zambia Revenue Authority over a 3.2 billion-kwacha ($586 million) tax charge relating to exports of copper cathode.
Konkola Copper Mines Plc wants the Lusaka High Court to quash Zambia Revenue Authority’s decision to charge a 16% value-added tax on the exports from January 2011 to March this year, according to court papers. KCM also wants the court to reverse the authority’s decision to levy the tax from July.
“There are serious legal questions to be determined with regard to the legality of the assessments,” Joel Chitambala, business controller at KCM, said in an affidavit filed on Oct. 31. The tax charge would “heavily impact” the company’s ability to service its financial obligations, including paying workers, he said.
Zambia implemented a law in July to allow better monitoring of exports by the government, which says mining companies are avoiding as much $2 billion a year in tax. KCM’s relationship with the government has deteriorated since March amid proposals for job cuts and Zambia’s President Michael Sata threatened to cancel the company’s license after it announced a plan to retrench 1,529 workers on Nov. 1.
KCM said Zambia Revenue Authority notified the company on June 7 that it had not complied with laws, after carrying out a tax audit in April, according to court filings. The authority said the company was required to supply import certificates from the country of destination for copper sales, KCM said in the filings. The authority also said KCM received payments for its exports in a U.K. account instead of a Zambian one.
Tax Charge
The authority is charging the 16% tax on the sales because the audit found no import certificates for KCM’s copper, according to the court filings.
The ZRA, based in Lusaka, has yet to file a response in court and didn’t immediately reply to e-mailed questions seeking comment. Joy Sata, a spokeswoman for KCM, declined to comment.
KCM sells its copper cathode exports to traders including Traxys SA, Marubeni Corp. (8002) and Ambrian Metals Ltd., and is not privy to who the final buyers are or where they are located, Chitambala said in his affidavit.
The company routed sales proceeds through a U.K. bank account to honor loan security requirements before depositing the money in a Zambian account, KCM said.
To contact the reporter on this story: Matthew Hill in Lusaka at [email protected]
Source: Bloomberg News
Thats gdp of zambia
Sata is doing a good job remember this is where gh made money through privatisation ukwiba
The best thing fellow zambians is to leave pf in 2016 so they they xan clean up the mmd mess and implement ideas to do that we need to vote pf and judge them after 10 years
Going by records at ZRA, these Indians at KCM have always had input VAT higher than output, thus resulting in you and me subsidising there operations. This should come to an now, not only with this Indian but all including Mahtani.
Stupidity of the highest order by these Indians. How on earth do you sue a government.
ZRA should stick by there guns and get this money, if KCM doesn’t pay within a given reasonable timeframe, you liquidate there assets. Hope to see this done sooner rather than later.
Suing, the new fad in Zambia
There is no way these Indians can have the guts to sue ZRA unless they know which GRZ big fish they bribed through their friend Mahatani to be able to dodge that amount of Tax.. Who ever the big fish is ,he must work hard to help them quash the case otherwise this case will expose the corruption still prevalent in PF administration.
So why is Zambia borrowing tu ma change when they can raise that amount from one mine operator? There is more than meets the eye in this case.
This is why FDD are calling for Chikwanda to retire in national interest.
KCM hit-back at Sata for threats of shutting down KCM and chess all Indians away.
It is NOT as simple as it looks. ZRA want to rely on VAT Rule 18 (1997) of the general rules of VAT to standard rate copper exports on basis that KCM has not provided stamped import documents. It is a strategy to get some taxes on the corporate tax and as a way of hitting at transfer pricing. These are complex tax and legal issues. I am however glad that the nationalistic sentiment is high and the attachment to the perceived theft of the family silverware has aroused angst!! And Joel, nice to know that you are now in the top echelons of the mining giant. I miss those days of your innocenc…..ki ki ki ki. Now you are in the rough and tumble of big league…. well not soccer but multi national economic politics!!
Glenco is making billions in profits each year and yet our welfare is getting worse each year. They might as well shut all the mines as we the ordinary zambians are not benefiting from our resources?
@MP
if KCM is part of Glenco group… then Sata is a small man,,, if white house can bend to Glenco,,, who is Sata from mpika to up his tail??
GlencoFirst am hearing of Glenco, or you mean’t Glencore.
I personally do not have problems with Tim Henderson. Glencore has invested quite heavily in the Syncnorium shaft at Nkana, A New smelter at Mufulira and associated auxilliaries. Mopani is currently toll treating a lot of meterial from KCC and MUMI in the DRC, a plus for Glencore.
All Vendata know is to talk without acting. Auditing the books to the core, you will find these Indians have not Invested a single Ngwee in KCM. Let’s get back that Mine please.
Agree the proof is in the pudding, look at the state of Muf versus the small town in Switzerland where the money goes. Global witness, BBC panorama have all run exposé on them! And we delude our selves that they are better than vendata? Why coz basungu and the GM is Bemba right?
GBM can pay that ka $586 million only if he asks Kabimba to be sent to Bosnia..
Ndobo’s inferiority complex makes you feel like putting duck tape over his mouth.
imwe guys bane ba pf..
put these … these… these… sorry aba ba mwenye were they rightfully belong.
why should we treat them with kid gloves?
get that mine back period.
My brother, Don’t forget that these mines were in OUR hands but we failed to handle them lamentably!!! KK got cars in exchange for copper form the japanese and at the expense of education, health etc in Zambia. So, by all means, swallow your pride and accept that your govts of the day HAVE FAILED to make anything of the copper that God blessed us with. Stop being a racist and address the issue at hand — HOW DO WE INSURE THAT THE COPPER PROFITS ARE ACCOUNTED FOR BY ALL PARTIES!!!! By the way, what are you dong in DRC? Making ends meet when Zambia has loads of copper??
Bhev – I personally do not belong to that generation that fails to run Companies.
The current crop in which I am will profitably run KCM much better than these Indian crooks.
Full Time: Zambia 0-1 Jordan (Own goal by Bronson Chama)
We discussing money here, not lost football. In fact I am grad abaice baishibako ku Qatar…. ku mangalande. You are the ones losing, those boys won, so many stories mu ma Chibuku bars ..” bakahamba ku Doha kusuma, ku Qatar mudala, the capital of Jordan, where Jesus resurrected”
Well am sure this money will even payback the Euro bond
Stupidity of the highest order by these Indians. How on earth do you sue a government.
ZRA should stick by there guns and get this money, if KCM doesn’t pay within a given reasonable timeframe, you liquidate there assets. Hope to see this done sooner rather than later.
@oldrugsout Its normal for a firm to sue a government, prosecuting the government happens all the time in legal issues. Though I am with you on account that GRZ must really collect our money here. This is the source of all Zambian issues, this is a huge scandal we are missing out on large amounts of money $586m is a great amount, it can repair many social ills such as poverty, poor health care, a lack of proper education, roads- we need to adopt a bully boy attitude when it comes to mining tax we need to be strong and collect taxes at all cost.. this is our survival, many Zambian lives can be rescued at that cost. Collecting this money is a test of whether PF is for the people or not. We ll see…
I would say that Zambia is losing much more in mining tax evasion and mining profits than all the ‘donor aid’ put together.
Why not nationalize the mines, and hire a management company to run it? That way the profits would go to the state – no conditionalities, no interest payments.
Also, let’s demand lots of transparency and accountability. If any of the ‘development agreements’ had been discussed in parliament, they might never have passed.
Also, it is time that ZCCM-IH swaps it’s shares in local mines, for actually dividend paying shares in the majority owners like Glencore, Anglo-American De Beers, etc. That way, at least they will receive dividends.
There you go my brother “Old Rugs OUT”, if you think that the govt cannot be sued then you are so far away from reality. And to think that you will run a company such as KCM? May God bless Zambia!!!! And Good Luck!
Its a winnable loophole for Gov. and points can be give to counter here.
Understand the what is being advanced and you will see the counter and claim additionally in penalties and charges???but it should be a point to define revenue recognition and related for mines by ZRA for purposes of taxes.
Winable by ZRA
I want to see a timeline associated to this claim… Liquidate these Indian assets if they fail to pay.
There just common crooks, and have no place in Zambia.
Someone knows whose stealing and that someone is not talking why?
Because they’re all from the same PF boat.If the thief was from MMD then you’d hear a bang louder than a thermonuclear explosion.
Mzambia – this is not about a thief being in PF or MMD. I personally want to see that money paid including under declared PAYE NOW.
That amount of money can be used to better the lives of many a Zambian.
Good evening
The problem is that the export chain is too long and complex. How can we establish the full value of our exports when we don’t even know the final destination?
That is the disadvantage of being unable to run our mines. It is very easy for KCM and Vendata to evade tax by declaring low profits when in actual fact they are selling off ten times as much. I doubt if any new laws will even help to monitor the exports. What we need is our own national wealth fund like the Swiss or Norwegians, where the full value of our copper is directly transferred.
If you touch their resources, they make sure you give them the full value first. European gas, oil or energy is represented by European money in European banks. That way, they are immune to exploitation.
PF sort these guys please,but investigate thoroughly so that we win the case plus interest
This is probably PF’s own complex scheme engineered to finance elections and other stuff…..the very same things they are persecuting RB for doing.
For your future reference OldRugsOUT there is a clear spelling difference between ‘there’ and ‘their’.
This issue is complex indeed because there are suspisions on both sides as raised by some bloggers. The best scenarior would be for both Govt and Co. to publish their production figures, tax obligations, wage bill. Then on the other hand ZRA should declare what each mining Co has paid so that the citizens know what has been paid to Govt. The Govt needs to intensify the audits on the amount of copper leaving Zambia and who buys it, no body sales copper lower than what is offered at (LOME) price, if they sale it at a cheaper price the company should still pay the same tax for amount produced, if they sale it at higher price than London metal exchange that is their benefit they should still pay what is due to us at agreed or ruling price(LOME). This would make life easier for everyone.
this is the spirit my fellow zambians. foe once lets unite for the gud of our rich but poor country. no stupid politics here. lets with onw voice fix bafitole aba benyenye. lets rake over the mines n find a better investor here. let them go back to eat their chillie chapati in bombay.
I think this is a form of negotiation for KCM. They want to use Sata’s daughter Joy at KCM to get their refund. Mind you KCM funds PF in cash in the same way it did to MMD. Little wonder why PF U-turned on windfall tax? Like others have said as citizens we are curious to know what this amount is a percentage of? Is it 16% of sales is what period? Again, what is the real value of copper? Sata and Chiluba sold these mines and now we are paying for their lack of vision and dullness
This is a big shame to indegenous zambians.We’re being greatly swindled and all our valuable resources are owned or run by foreigners yet we’re always spending great energies on small mindedness.
why are you guys being racists? what the indians have done for Za,mbia no other community has done.
they employed our brothers and were good before, now they are laying off lazy miners, you are annoyed! wake up ZAMBIANS,THATS WHY WE ARE ALWAYS UNDERDEVELOPED- WE CANT THINK OUTSIDE THE BOX….
@bob, really what are u using to think? definitely not your head. these Indians did what they did for the purpose of making money not that the did it for free. in fact they have been exploiting zambians big tym and this has continued for a very long time now. what has unfolding at KCM is but a result of poor planning for these companies for the most part the thought they could get away with plans of evading taxes but now things have caught up with them. now they want to sue GRZ, the government that gives them tax holidays. like HE said “we will revoke their license” and i hope it happends soon so that zambians can take over most of these companies. i for one dont believe in the system of “investors” the way it is spoken of. o believe the bast investors are the ones who are here in…
Just wondering when ordinary Zambians will start benefiting from their mineral wealth. Since the demise of ZCCM there have been no tangible benefits visible to the ordinary Zambian. Chile and Peru ,countries dependent on copper like Zambia are way ahead of us in terms of development. Is the black man cursed or what? Seems we can’t get our act together and progress as a country. 50 years on and we are still struggling with basic development.
Chile and Peru are way ahead of us because a nation’s most valuable resource is NOT minerals but its human resouces.
As long as copper remains in zambia no foriegner should black mail us as they did with previous govts these crooks this is the way they corrupted former leaders to away from poor zambians now they are at it again
Sir, make your argument instead of ranting. Courts proceed on evidence and not sentiment. Did KCM export the copper? What evidence do they have? Has ZRA been refunding input VAT? On what basis; what has been the practice? What mischief has KCM done in this case to have such an assessment? These are the questions a lawyer should bear in mind as she prepares that bundle of documents.
This is how they have in the past maniplated former leaders and made them sale mines on a song , and undervalued companies where HH took advantage to make a furtune, now they are testing sata with same gimicks , magandes are culprits who don’t feel for their own people if only they can line their pockets , now HH is hiding he knows what he does best
Chimbwi pakulila ……
KCM can afford to dare ZRA because a lot of hands have probably been oiled. These guys at ZRA must be sweating by now trying to see how best they avoid being exposed!
The whole system is oozing the stinky pus of corruption!
The ZRA top brass must be fired for sleeping on duty!
Mwenye also must be made to account for such eversiveness!
We need a fair share of taxes from mines.
The tax ratio between Mines and PAYE is 2:5, a situation that explains why Zambians are the most taxed in the region and yet their mines are making billions in dollar terms! We need to flip / reverse this ratio before we can start to enjoy lower PAYE thresholds of max 25%!
How can you fairly assess something from the outside looking in? It really just hightens the probability of getting of it wrong…
How different are we as Zambians from these so called investors, why cant we cut them off and regain control of our natural resources? I know everyone will say but we failed to run the mines under govt but my question is, surely that was then, havent we learnt as a country how to run them now?
I strongly doubt there is an investor out there that would leave his/her country with a vision of making Zambia rich. Time to wake up, only we can help us..
This is none partizen, we are one people, time we started acting as such.
Its winnable with careful analysis, looking at consolidated disclosure by vendetta on their site on KCM Financials together with submitted to report service on exchanges, the disclosure from related part on published, the info here from ZRA on tax point and the desire for related parties to declare favorable taxes in their domicile.
A purchase from one becomes a sell to the other.Ultilise your influence as a Gov. to Gov. and ZRA as part of the larger Revenue association and win the case.
Check the escrowed invoices and amounts paid on their loans and see.Some of these invoices are actually registered or booked online
From my knowledge and experience of VAT at ZRA and in practice, this is a difficult case to win. As @Cindy has well noted, ZRA want to use the rule of production of stamped import document amongst others I pressume. However, we all know that copper is meant for exports bar for small usage at ZAMEFA and others. It will be an uphill battle to pretend that in face of evidence of truck loads clearing the border and funds received from exports, these exports will still be taken as local sales. What KCM should do, and I am sure they have, is to get good tax experts to argue this straight forward winnable case. The danger of losing is that it will have a domino effect as all exporting companies in mining and agriculture will be in trouble.
Finally we can get our asset back.
1.Customers’ Orders
2.Sales Contracts
3.Inter-Company Correspondence
4.Copy Export Invoices
5.Advice Notes/Consignment Notes/Packing Lists
6.insurance And Freight Charges
7.Evidence Of Payment
8.Evidence Of Receipt Of Goods Abroad.
9.Take Reasonable Steps To Ensure That The Goods Are As Described By The Exporter
10.Ensure That The Necessary
11.Pre- Or Post-Shipment Customs Requirements Are Fulfilled; Keep Records Of Each Export Transaction;
12.Provide The Exporter With Valid Export Evidence Once The Goods Have Been Exported.
Looking at the above???
“Its winnable by ZRA”
Do Zambians hate Indians. Most of the comments here are racist and full of jealousy.
The ten commandments to not allow jealousy, gossip, false witnesses, etc. Is Zambia being ruled according to the ten commandments as promised.
saimbwendeki, it is not what we know, it is what the laws says. If they can not provide the import certificates, then we have got them. The import certificates should help ZRA determine the correct and actual value of the company’s export sales which I believe they have understated. The export certificates should then save to establish a clear case of Income tax evasion which I believe is the case. Believe you me, they will fight that they do not produce the import certificates.The statement below already speaks volumes:
“KCM sells its copper cathode exports to traders including Traxys SA, Marubeni Corp. (8002) and Ambrian Metals Ltd., and is not privy to who the final buyers are or where they are located, Chitambala said in his affidavit”.
Hidden related final buyers…????
I donot know also how useful the information and statistics at weigh bridges helps to support the numbers in this case.
I have seen in one neighbor country these statistics forming a key point in the assurance process
Zambian mineral wealth is becoming a something else all because the investors in the mining sector knows that govement and Zambian are desparate about jobs the investors provide than the money they make by selling our minerals