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Joint press release by Centre for Trade Policy and
Development(CTPD), Counter Balance, Eurodad, Tax Justice Network,
releasedin the Zambian Media
10 February 2011Mopani Copper Mines is dodging taxes in
Zambia
Mopani Copper Mines , a Swiss Owned mining company, fundedwith
EU development monies, is siphoning its profits out ofZambia
without paying taxes. Instead it is putting the money intoa tax
haven, Switzerland, according to a Financial Audit Report.
Mopani Copper Mine (MCM), a company domiciled in Zambia, but
ownedby the Swiss firm Glencore, received a massive EUR 48 million
loan fromthe European Investment Bank (EIB) for the purpose of
development.
The leaked tax audit, carried out by tax specialists Grant
Thornton andEcon Poyry, covered the activities of the mines from
2006 to 2008, andexamined the trial balances since 2003. Despite
the fact that the auditwas finished in the fall of 2009 it was kept
secret until Friends of the EarthFrance and other NGOs got hold of
it and made it public.
The auditors found that MCM resisted the pilot audit at every
stage. Thecompanys book keeping was incomplete, several legally
requireddocuments were lacking and the general ledger analysis
showed severalloopholes and couldnt be matched with the trial
balance.
The auditors also found an inexplicable doubling in the costs of
the
company between 2005-7, which shows that the company has
beenartificially inflating its costs to minimise the profits shown
in their books sothey could pay less taxes.
The auditors concluded that the Mopani cost structure cannot be
trustedto represent the true nature of the costs of the Moponi
mining operation.
And Reacting to the audit report, Centre for Trade Policy
andDevelopment (CTPD) Executive Director, Savior Mwambwa stated
that;
this audit confirms Zambian civil Societys claims and position
that
mining companies are depriving the people of Zambia social
andeconomic benefits that are rightly theirs through tax evasion
andavoidance practices. This is a wakeup call to the government of
Zambia toundertake an industry wide financial audit of all mining
companies for thepurposes of ZRA(Zambian Revenue Authority)
updating its tax assessmentfor mining companies and donor countries
should rise to the occasion andsupport GRZ in this. Mopani should
be penalised by heavy fines plus taxpayments with interest, failure
to which its operating licence should besuspended.
These are the sort of issues that should pre-occupy the people
of Zambiaand politicians in this years election campaigns. We hope
with this sort of
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clear evidence the government will reconsider its position with
regards totaxation of the Mining companies.
Considering the findings of the leaked tax audit, it is hard to
see howthese development objectives got fulfilled. Paying taxes in
poor countrieswhere they operate is one of the most important ways
that investors can
contribute to development, says Anne-Sophie Simpre from Friends
ofthe Earth France (FoEF).
This incident shows once more that the standards of the EIB are
entirelyinadequate. The time has come to seriously question if
institutions such asthe EIB are suitable to manage EU development
funds, she adds.
Antonio Tricarico, Counter Balance: In September 2008, French
PresidentNicolas Sarkozy, addressing the European Parliament as
President of theEU, stated that companies and banks operating
through tax havens shouldnot receive public support. The Mopani
case shows without any doubt thatstill EU public money flows
undisturbed through tax havens at the onlyinterest of multinational
companies and the EIB does not bother to listento European
governmentsThe CTPD is demanding for:
The implementation of all recommendations contained in the
AuditReport and this should be applicable to all mining
companies.
a complete reform of the mining tax regime to enable ZRA
enforcesimple and easy to implement taxation system.
The donor community should support the government of Zambia
toincrease ZRAs capacity to undertake financial audits and
undertatkea fresh tax assessment for all mining companies.
The government should recover all lost tax revenue from
Mopaniand other mining companies found wanting with interest and
inaddition fines should be imposed uncoorperative with
governmentsaudit efforts.
The group of European NGOs are demanding that;
- an independent investigation by the European parliament into
theEIB and the ECs due diligence processes, which in this case
failed tocomply with their responsibilities
-- the EU to immediately establish binding standards that
require
multinational companies to report their accounting in each
countryin which they operate (country by country reporting). This
caseproves that this is necessary to ensure greater
financialtransparency and put an end to tax avoidance practices
that
damage local communities in the South and European
taxpayers.
