All the hot air about a ‘missing’ US$ 3bn

Tue, 16 Jan 2018 10:17:36 +0000

By Martin Musanka

 ZAMBIA’s mining industry, which has suffered from unpredictable  Government policies in the past 10 years, had its fair share of  commentaries during 2017 on the performance of mining companies which  were repeatedly accused of tax evasion to the tune of a colossal US$3  billion per year.

Some self-styled analysts have come forward to accuse them of  externalising revenues and evading tax without proffering substantiated  evidence as to how these activities have been executed, leaving some of  their statements hanging with no balancing act.

Without regard to pitch some of the information with the Zambia Chamber  of Mines (ZCM) for verification and have an opportunity to examine the  evidence, some of the analysts went throbbing, in releasing alarming  figures against an industry which has seen a number of regulations meant  to control the sector.

One consistently overlooked element is that while investors in the  mining industry are not obliged to undertake certain assignments in  serving the local communities in which they operate, the scale should be  in line with what the mines expect to benefit from their operations.

So far, the mines have exceeded common expectations in funnelling  resources into various social sectors to the benefit of thousands of  citizens, adults and children alike—which the commentators have either  ignored or denigrated.

RESPECTED

If the Zambia Extractive Industries Transparency Initiative (ZEITI) is  respected for its findings regarding what the extractive companies in  Zambia declare in terms of tax, why did the country witness a number of  press statements from different “analysts” accusing mining companies of  minting huge profits and spiriting untaxed sums overseas?

Yet, the reports by the donor-supported ZEITI are authentic and rolled  out to affected industry players, including the Zambian Government  officials.

During the year 2017, there were often repeated claims that accused the  mining industry of tax avoidance and a whopping US$3 billion was pegged  as the amount Zambia was losing annually through tax avoidance by the  mining sector.

However, the ZCM, in reaction to such accusations, made it known to the  public that such accusations were not credible and questioned the  ulterior motive behind the sustained campaign of discrediting the mining  industry.

The bottom line that came out of the statement issued by ZCM President  Nathan Chishimba, was that the commentators were being unfair to the  mining industry by deliberately issuing misleading statements about the  payment of taxes.

In a statement on October 26, 2017, Chishimba said the official  mining-industry position was vindicated through an analysis by an  American research institute that dismissed as not credible, the claim  that Zambia was losing US$3 billion a year through tax avoidance by the  mining industry.

“We at the Chamber of Mines have consistently argued that these claims  of tax avoidance are simply not credible. It is heartening to see an  independent study reach the same conclusion,” Chishimba said in a  statement.

The analysis was done by Maya Forstater, a researcher and advisor on  business and sustainable development and a visiting fellow at the  US-based research institute, Center for Global Development (CGD). Her  analysis is published on the CGD website, and is entitled Stop Spreading  the Myth: Zambia is Not Losing $3 billion to Tax Avoidance.

“Organisations that have allowed this myth to spread have not done any  favours to the people of Zambia, and they have a responsibility to put  it right,” she says.

Forstater’s research tracks down the source of the US$3 billion tax  avoidance figure ($2.885 billion, to be exact) as the Washington  DC-based think-tank, Global Financial Integrity (GFI). The figure, which  Forstater says is not at all credible, has been uncritically repeated  over many years until it has assumed the status of truth.

“GFI has promoted its version of the Zambia billions story strongly over  the years and it has been taken up widely. The headline that ‘Zambia  lost $9 billion over a decade’ has been repeated by Reuters, in the  Guardian, in the Globe and Mail and by Transparency International, for  example. It made its way into a report by the UK’s International  Development Committee,” says Forstater.

 UNFAIR

In this regard, Chishimba said it was unfair to have a sustained  position which merely portrayed an incorrect position on the mining  sector in Zambia and, relieved with Forstater’s analysis, said: “One can  only hope this puts to bed once and for all the ridiculous claims of  billions lost to tax evasion. It seems to have become an obsession, and  drains vital intellectual energy that could be better channelled into  growing the economy and boosting employment.” Earlier in October of last year, the Chamber had fired a broadside to  critics and detractors of the mining industry who were fond of levelling  accusations of tax evasion and illicit financial flows, challenged them  to produce backing for their diatribe against the mines operating in  Zambia.

The Chamber feels irritated by the fact that its members have always  been placed in a dock with incorrect accusations of tax evasion with no  basic information that can pass for evidence.

“In the absence of evidence, these allegations are both outrageous and unhelpful. They are intended to damage the reputation of an industry  that is central to our economy,” Chishimba had said in a statement the  Chamber released on October 11, 2017 as a reaction to one commentator,  Kalima Nkonde.

Nkonde had alleged that Zambia’s national budget presentation was flawed  because it did not address tax evasion and illicit financial flaws by  the Zambian mining industry. He went on to accuse the mining industry  and multinationals of “robbery” and “smiling all the way to the bank.”

Chishimba argued that Nkonde’s position was riddled with speculation  presented as fact, which uncritically recycled claims by third-parties  about missing tax revenue that had never been substantiated or verified.

“Once again, we have a commentator quoting from the Financial  Intelligence Centre report, without actually having read it—if he had,  his conclusions would be very different. We have tried to follow the  trail of these allegations to their source, but we cannot find any  primary data source that reveals this figure of $3 billion—or any other  figure for that matter.

“Furthermore, these are the very same allegations that preceded the  regressive mining tax policy changes of 2014-15, and we surely remember  how much damage that hiatus caused us,” Chishimba said.

The position of the Chamber was that the sums being bandied about were  so large as to stretch the bounds of credibility. They implied that more  than half of Zambia’s annual copper production is somehow unaccounted  for.

“We challenge Mr Nkonde—or anyone else—to produce the evidence of these  allegations,” said Chishimba.

 QUESTION

The Chamber is not the only organisation in Zambia to question the  constantly recurring allegations, that the mining industry was stealing  $3 billion in mineral production every year that does not show up in  official statistics.

The same allegations were roundly dismissed both by Director of Mines in  the Ministry of Mines and Mineral Resources, Mooya Lumamba, and Mineral

Production Monitoring Support Project Chief Consultant Ron Smit in an  interview with the online publication Mining for Zambia, earlier last  year.

“These allegations are wholly untrue, and come from a position of  ignorance—not just about how copper is mined and produced, but how our  mineral monitoring systems work,” said Lumamba.

Smit added: “We have noticed that this particular allegation has been  recycled in the media for several years now, but no one ever offers any  proof.”

The mining industry has performed commendably well by effectively  contributing to the economy through tax, and further impacting  communities through individual mining companies’ corporate social  responsibility programmes.

Well, as the Chamber has put it, it is only hoped that observers would  be more helpful in 2018 by making constructive comments which will help  grow the mining industry and boost employment, rather than specialise on  recycling destructive claims derived from speculative sources. –

 Courtesy of SUMA

SYSTEMS.