ZRA in strong negotiation position over $US7.9- billion FQM tax bill
THE Zambia Revenue Authority - ZRA has confirmed that the US$7.9billion tax bill slapped on FQM’s Kalumbila Mines was made up of USD$2.1- billion penalty and the accrued interest charge of USD$5.8billion. These the Revenue Authority has confirmed were assessed on firm ground.
A source within ZRA who is part of the team that conducted the tax audit and computation of initial assessment of the announced US$7.9 billion told the Zambian Business Times - ZBT that the assessment is technically sound and not politically motivated.
ZRA on March 20, confirmed that it had assessed the First Quantum Minerals - FQM controlled Kalumbila Mine Limited and slapped a tax bill amounting to ZMW76.5 - billion (about US$7.9 billion). According to ZRA- Corporate Communication Manager Topsy Sikalinda, the tax authority in its preliminary assessment of ZMW76.5 - billion (USD7.9 - billion) issued to FQM, for misclassifying consumables and spare parts at importation as non-taxable machinery and equipment for the last five years.
"The said items were declared as mining machinery (which attract customs duty at zero percent) when in fact not. The applicable duty rate for the items ranges from 15 to 25 percent," Sikalinda told ZBT.
Sikalinda also made mention that ZRA has since launched investigations to ascertain the involvement of the un-named clearing agent, who, if found to have been actively involved in the suspected tax scam, will face appropriate sanctions that may include complete revocation of its trading license.
"We also wish to announce that starting 26th March 2018, our investigation teams and auditors will commence the audit of all mining firms in Zambia" said Sikalinda. He said that ZRA was looking forward to co-operation from other top mining companies during the audit period.
"We are, therefore, appealing to all other companies and players in the mining sector that may have been involved in illicit tax activities to make self-disclosure before we discover them. This will help them minimise their exposure to penalties and interests" stated Mr. Sikalinda.
Some of the top copper mines that are expected to be audited include Glencores and Vedanta’s local units namely Mopani Copper and Konkola / Lumwana Mines respectively.
Meanwhile, FQM president, Clive Newell in a media statement issued on the same date, 20 March made available to ZBT disputed the assessment.
Newell stated that ‘FQM unequivocally refutes this assessment and questioned the basis of the calculation’. He however stated that FQM will continue to work with ZRA and the Zambian authorities to resolve the issues. FQM further on had a conference call with its shareholders to explain the matter clearly.
The contribution of Zambia’s large copper mines to the country’s treasury remains a thorny issue as only their Pay as you earn - PAYE has been significant. Other lines of taxation such as corporate tax remains insignificant as the mines have employed complex tax planning expertise that are way more advanced for the local tax authority to contend with.