6 February 2013

Zambia: Govt to Boost Mine Taxes

GOVERNMENT will introduce new measures to boost tax collection from the mining sector, Finance Minister Alexander Chikwanda has said.

Last year, The Guardian of the United Kingdom, reported that Zambia lost more than KR41 billion (K41 trillion) in the past 10 years through tax evasion, which could be traced mainly to mining multinationals.

Mr Chikwanda said in an interview yesterday that the mining sector in Zambia was contributing less compared to other regions.

To this effect, Mr Chikwanda said, local experts would be engaged to assist with implementation of the new system.

The minister said there was need to calculate the taxing based on the true production and export data of minerals generated.

"We will introduce measures and relook at the tax system in the mining sector. Our mining sector has not contributed much compared to the rest of the region. So we want to engage local experts and ensure we have the statistics on mineral production and exports, and then we will find modalities to effect new tax measures to increase revenue collection," Mr Chikwanda said.

The Guardian reported the huge sums had been illegally siphoned out of the country, with most of it ending up in offshore banks and tax havens, according to a report by financial transparency campaigners.

The Washington-based group Global Financial Integrity (GFI) blamed "crime, corruption and tax evasion" for the loss of the funds.

"The lost money, most of which can be traced to multinational copper mining operations, is equivalent to almost half of Zambia's GDP. They (big global mining companies) are robbing the opportunities for the countries to advance, it (the money) could have been used to build hospitals and schools, and lift the economy out of poverty," Dev Kar, an economist and co-author of the report said.

He said it was difficult to track where the money went, but that most of it ended up in "offshore banks and tax havens".

Sarah Freitas, the other author of the report, said $4.9 billion (KR24.5 billion) of Zambia's lost funds between 2000 and 2010 could be traced to trade misinvoicing, in which importers pretended to pay more to foreign companies than they actually did, with the remainder being slipped into offshore bank accounts.

The UK government has investigated allegations surrounding Zambia's lost tax revenues from foreign-owned mines, including claims that Glencore avoided paying up to £76 million a year in tax on its Mopani Mine in the country.

Glencore denied the allegations.

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