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.
