Zambia's state tax body has asked the country's second-largest
mining company, Mopani Copper Mines, to pay more taxes following an
audit into the company's tax returns for 2006-2008, government
officials said late Monday.
An official with the Zambia Revenue Authority said that Mopani,
a unit of Swiss commodity trader Glencore International PLC
(GLEN.LN), had been asked to pay more taxes after auditors hired by
the government detected discrepancies in its returns.
"An independent evaluation of the revenue figures submitted by
Mopani for tax administration is still ongoing," he said, adding
that the company had been asked to voluntarily pay the taxes it
"evaded" before ZRA comes up with its own figures.
A company spokeswoman in Zambia couldn't immediately
comment.
Mopani has in the past dismissed allegations contained in the
audit report. The audit, commissioned by Zambia's government last
year, concluded that there were inconsistencies in production and
revenue figures submitted by Mopani to the ZRA.
Tax consultancies Grant Thornton and Econ Poyry said that Mopani
uses its relationship with its parent company, Glencore, to carry
out practices such as inflating operational costs, the underpricing
of copper, irregular hedging and "transfer pricing" with Glencore's
unit in the U.K.
Transfer pricing usually refers to allocation of assets between
related entities, sometimes at non-market prices.
The audit said that Glencore, which is also the sole purchaser
of Mopani's copper, determines prices and that some copper from the
mine was sold between 2006 and 2008 under an old contract, in one
instance 25% below the London Metal Exchange price.
Allegations of tax avoidance have renewed calls for a vigorous
audit of Zambia's entire mining sector.
Earlier this year, Zambia's Extractive Industries Transparency
Initiative Council said there was a discrepancy of at least 247
billion Zambian Kwacha ($52 million) between what companies paid
and what was recorded by government in 2008 alone.
Mopani operates the Mufulira smelter and underground mine in
Zambia as well as the Nkana mine. In addition to concentrates from
its mines, the Mufulira smelter also treats concentrates from First
Quantum Minerals Ltd.'s (FM.T) Kansanshi mine.
-By Nicholas Bariyo, contributing to Dow Jones Newswires;
256-75-2624615 bariyonic@yahoo.co.uk