Recently, Financial Intelligence Centre (FIC) assistant director Clement Kapalu disclosed that Zambia is losing US$3 billion annually due to illicit financial flows mainly perpetrated in the minerals sub-sector, where tax evasion malpractices such as transfer pricing, over and under-invoicing and trade mispricing is rampant.
In trying to correct these flaws, ZRA is seeking the services of an auditing or investigation firm to undertake a forensic audit on a number of large mining companies.
According to a request for expression of interest, ZRA intends to engage a company to perform audits of identified mining companies to establish their tax compliance status.
“This audit will focus on value added tax (VAT) and will also aim to identify any other areas of non-compliance with legislation, fraud, tax evasion and avoidance schemes perpetrated by the mining companies to, on the one hand, minimise their tax obligations and maximise their profits on the other.
“The firm will be required to produce a comprehensive report outlining the issues observed and recommend ways in which ZRA should conduct future audits,” it stated.
It stated that the audit will cover the last five accounting periods of the identified mines and will cover most areas such as sales, production, finance, distribution, human resources, as well as import and export operations.
“The investigation will focus on establishing the completeness, accuracy and authenticity of the corporation tax, income tax and VAT returns submitted by the mining companies in relation to the underlying data and information from their business operations,” it stated.
It stated that the auditing firm will propose an appropriate time frame for the assignment indicating deliverables (output) and appropriate reporting lines commensurate with the stated objective.
The best you ba ‘Zet Alla Eee’ can do here is to ‘secretly’ establish Zambian accounting employees that are there already and working for those mines and ‘put’ them on your pay-roll, so that they can ‘spy’ for you on various figures that are tempered with by the Mine owners. That way, those mining thieves could be caught napping…
This is pretty boring! Year in, year out, it is the same story. Ministry of Mines dish out contracts to auditors but nothing happens. Zambians should just admit that we were born to be shafted by foreigners. We are not smart and ZRA is too incompetent to do their job.
Am sorry, but it sounds so silly of ZRA to appoint a private auditing firm, which will itself be bribed by these mines to under-declare their turnover and production figures. Now you’re admitting that you’re incompetent Ba ZRA…. Cry my beloved Zambia!
ZRA must not wait for the country to be robbed in order to institute audit processes. As a strategic industry to our economy, ZRA is supposed to have PERMANENT OFFICES AT EVERY MINE!!!!
Do these guys know how much COBALT and EMERALDS are exported from Zambia, and the monies involved?
Come on ZRA; WAKE UP – you’re the reason this country is so poor…
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Guys,
I have evidence that:
Chambishi Metals
Mopani, and
First Quantum
Are guilty of this.
KCM is clever, and could escape
KCM is the worst offender and easiest to catch. The Indians will just offer bribes to the auditors.
Does ZRA have capacity to address transfer pricing and the diversion of profits from Zambia by multinational corporations (MNCs) that own the mines, including Chinese companies, with very complex accounting systems? Does ZRA have any Transfer Pricing Specialists (economists, lawyers or accountants) with significant experience of transfer pricing work and able to lead inquiry work on the most complex and cutting-edge cases of these MNC that have offices around the world? Can ZRA apply a multidisciplinary approach to these inquiries in identifying and investigating key transfer pricing and diverted profits risks?
I have my doubts …
This is a laudable step by ZRA and Govt.I am so happy in that some of our voices have been heard.I wrote an article on Tax restructuring last year based on my experience abroad.Please do not hire local audit firms.Outsource the service from experts in mining operations and tax which are complex from abroad who cannot be corrupted.Possibly make it performance based in terms of amount tax recovered.Please pay for the expensive service from experts but tax recovered will be more.Gvt should focus on Mncs for tax than Smes.That is where money is.Mncs are crooks in tax avoidance,just read international financial press.
Hello, where was this statement from the ZRA published?
Why only large mining firms? And what is LARGE? Audit everyone
This is timely and long overdue. But at whose cost is this expensive venture, ZRA or mining companies? Audit all companies found wanting including parastatals, Zambia Sugar, all private companies not remitting TAX obligations & other taxes & pass on the bill to them if proven guilty. Advertise for each job that comes up not appointing permanent auditing firm who will end up doing the same thing as privatization scandal. Which Zambians again will end up discussing for years without any action for the culprits.
Concentrating on VAT because ZRA owes millions to the mines. While concentrating on VAT mines can maneuver other areas..ZRA should institute random audits.
We have warned the mines now they have time to formalise their pzperwork……… Random checks always catch people out