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MINING TAX DEFICIT SHOCKER

… Zambia Chamber of Mines exposed

By BUUMBA CHIMBULU
THE Mining Industry owes Government in excess of K19.68 billion in unpaid tax revenue, a Daily Nation investigation has revealed.
This is contrary to claims by the Zambia Chamber of Mines (ZCM) that Government owes the industry US$1 billion (equivalent to K18 billion) in unpaid Value Added Tax (VAT).
The Chamber has now been accused of making false and inflamatory statements intended to undermine Zambia as a credible investment destination.
Government sources have slammed the Chamber for the unfounded claims which had the potential to harm the economy in terms of investor confidence and undermine tax compliance in Zambia.
In a document titled “A policy brief for a post Covid-19 Zambian Economy: The road to Recovery“, the Chamber of Mines claimed that Government through the Zambia Revenue Authority owed the mining industry in excess of US$1billion in unpaid VAT refunds.
But investigations conducted by the Daily Nation Newspaper have revealed that claims from Zambia Chamber of Mines were untrue as outstanding VAT refunds due to the mining companies amounts to K10.4 billion and not the claimed US$1 billion (K18 billion).
According to sources at ZRA and major mining companies, the mining companies in fact owe Government tax revenue in excess of K19.68billion, the bulk of which related to unpaid Value Added Tax (VAT) Assessments relating to failure by mining companies to fulfil VAT Rule 18, which required legal proof of export by any exporter before claiming VAT from the government.
Other unpaid taxes by large mining companies related to illegal transfer pricing practices some of which have already been decided by the Supreme Court in favour of ZRA.
The Government on the other hand had outstanding VAT refunds due to the mining companies amounting to K10.4billion with an overall net position of K9.3billion owing to the Government by the biggest mining companies.
A ZRA senior official said it was illogical for mining companies to expect government to continue refunding them VAT when they are owing taxes.
Since 2008, the mining companies have either been refusing or have failed to provide required documentation for them to claim VAT on their exports of minerals.
According to our investigations, it was impossible to export copper from Zambia to anywhere in the world without documentation, as a result mining companies have been refusing to provide documents because prices declared to ZRA at the time of export and on which basis taxes were to be paid were far much higher than the price they actually charged for the same minerals when sold in foreign countries.
Their actual fear was that, if genuine documents were used, ZRA would impose additional taxes, interest and penalties.
An official from the extractive industry said the Zambian government must increase its participation in the mineral value chain in order to avoid such malpractices by mining companies.
He said the Chamber of Mines was expected to be professional and avoid such alarming statements that are designed to hurt the economy.
He added that, it was unfortunate that unpaid taxes by large mining companies related to illegal transfer pricing practices, some of which had already been decided by the Supreme Court in favour of ZRA.
When contacted, the Chamber of Mines requested for a press query to provide an informed opinion.
They also said ZRA was providing new figures which they needed to study.

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