The Post Online, June 24, 2011

Key measures should be instituted to prevent revenue leakages from the mining sector, says CUTS International Zambia.

Commenting on the recent decision by the Tanzanian Parliament to approve a US$27.4 billion five-year development plan that backs the introduction of a super-profit tax on mining companies, CUTS acting Centre Coordinator Simon Ngona said Zambia needed to review the whole mining tax system to achieve optimum benefits from the country’s mineral wealth.

He said it was important that the country instituted key measures that would ensure revenue leakages were minimised or completely sealed.

He explained that re-introducing windfall tax without addressing key challenges of taxation in the extractive industry would not be an ultimate solution to ensuring Zambians benefitted from the country’s mineral wealth.

“It is not a single line of tax that ensures a country benefits from its industries but the whole tax system and framework for that particular industry,” he said.

“The Zambia Revenue Authority (ZRA) is on record admitting that it does not have the capacity to properly tax the mines nor monitor their activities and recent mine audits have reviewed glaring tax evasion and avoidance efforts by the mining companies…”

Last week mines minister Maxwell Mwale told Reuters that the government would audit more mining companies after previous audits turned up as much as US $200 million in unpaid taxes from the key economic sector.

Mwale said the government was still owed by Mopani Copper Mines in unpaid tax.

A recent audit on Mopani early this year revealed glaring irregularities and inconsistency in production and revenue figures that the mining company submits to ZRA for tax administration, most of which hinge on its links to Glencore AG.

Revelations of the audit sanctioned by the government with the aid of some cooperating partners also revealed the country’s lack of capacity to verify records submitted by mining firms to ZRA for tax administration.

It stated that the taxes being paid by mining firms in the country were not consistent with production volumes and the revenues from copper sales.

Mopani has refuted the claims describing the report a flawed.

The government has however asked the miner to pay back the money.

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