Rainbow Party General Secretary Wynter Kabimba says FQM’s Kalumbila Mine was able to evade tax for a period of five years because of the incompetence and rampant corruption within the Zambia Revenue Authority.
And PeP president Sean Tembo has observed that if ZRA collected all the tax which was due to the treasury from the mining sector, there would be no need for an IMF bailout to support government’s expenditure.
Meanwhile, First Quantum Minerals president Clive Newall has refuted the assessment by ZRA, which is claiming K76.5 billion from Kalumbila.
On Tuesday, ZRA uncovered a scam in which the mining giants had been importing spare parts and other consumables without paying customs duty for the past five years.
However, in a statement issued on Tuesday, First Quantum Minerals refuted the claim.
“The Company confirms that it is in possession of a letter from the ZRA, dated March 19, 2018, noting an assessment for import duties, penalties and interest on consumables and spare parts of 76.5 billion Zambian kwacha. The Company unequivocally refutes this assessment which does not appear to have any discernible basis of calculation and will continue working with the ZRA, as it normally does, to resolve the issue,” Newall stated.
But speaking in an interview with News Diggers! yesterday, Kabimba said there was a lot of weakness in ZRA when it came to monitoring taxation in the mining sector.
“My thoughts when I saw that clip on TV was that we still have a lot of weaknesses in ZRA in terms of them having the capacity to monitor taxation in the mining industry. That to me seems to be the problem. Zambia being the second largest copper producing country in Africa from 1964, surely by now we would have developed very effective mechanisms of monitoring taxation in the mining industry. Surely how can they continue doing that (evading tax) for five years?” he questioned.
“There are two explanations to that. One is that there is a lot of corruption within ZRA for that particular mining company, and I’m sure it’s not the only one, for a period of five years continuously evading? They come to the boarder and they declare commodities which are zero rated and for five years ZRA officers are not able to detect that? It is very strange. So either there’s rampant corruption in ZRA or they are incompetent as an organization. Incompetence simply means that you lack the capacity to monitor an industry like the mining industry and be able to tax them. And that has been the problem with mining industries in the country. There’s a lot of tax evasion and I’m sure what we heard yesterday (Tuesday) is just a tip of the iceberg.”
He said ZRA owes Zambians an apology for failing to generate income for the country from main stay of the economy.
“What ZRA should have done firstly is to apologize to this nation that they have not had the capacity to collect tax from mining industries. We have been wondering how an industry like that which is the main stay of Zambia’s economy is failing to contribute monies which would change the economy of this country. If you read a book by Tom Burgess, he referred to that kind of evasion as looting. In this well researched book, (it states) that mining employees, all the mining employees put together on the Copperbelt pay more taxes to the Zambian government than the mining companies. They contribute more tax to the economy of this country than the mining companies themselves. Surely if anybody had read that book he should have sounded an alarm bell to ZRA that something is wrong somewhere and they would have not allowed a situation where one mining company can evade tax for a period of five years.”
Kabimba said Kalumbila mining company should be prosecuted to send a serious message to other investors.
“The so called investors that some political parties cry for that they can turn around this economy, and claim to come and create employment, are the criminals to the Zambian people. They are the people that are depriving the Zambians of their wealth. They are the exploiters. The economy must be transferred in the hands of Zambians so that Zambians can become the catalyst. These guys are nothing other than criminals to the Zambian people. They are thieves. So we want to hear that the particular mining in question has been prosecuted. Penalties are not enough, they must be prosecuted in the Zambian courts if ZRA and the PF government is going to send a serious message to these investors,” he said.
Meanwhile, Tembo added in statement issued on Wednesday that the assessment by ZRA was testimony enough that the mining sector was not paying its fair share of tax to the treasury.
“As PeP, we are extremely overjoyed with the decision by ZRA to issue an additional assessment of about US$7.7 billion against First Quantum Minerals Ltd, Kalumbila Mine. This additional ZRA assessment against FQM is testimony enough in support of the long held position by PeP that the mining sector is not paying its fair share of tax to the treasury. Its percentage contribution to the national tax pool is far lower than its percentage contribution to the Gross Domestic Product, and that this discrepancy needed to be investigated,” he stated.
And Tembo observed that if all the tax which was due to the treasury was collected, government’s financial situation could transform overnight.
“If we collected all the tax that is due to the treasury from the mining sector, our government’s financial situation can transform overnight from sickly to bouncy. There would be no need whatsoever for any IMF bailouts or indeed any loans for that matter, to support government’s expenditure commitments. As a party, we are very confident that this US$7.7 billion ZRA additional assessment against FQM is only a tip of the iceberg and that an extended audit of other mining companies is likely to reveal additional instances of tax evasion that will likely amount to billions of dollars as well,” he stated.
Tembo hoped that President Edgar Lungu would not be influenced by mining giants to set aside ZRA’s assessment.
“As PeP, we hope that President Lungu will not get unduly influenced by these mining giants such as FQM and cause his government to set aside this additional assessment which ZRA worked so hard to bring about. This concern about President Lungu’s lack of spine to withstand pressure from mining companies, is not a matter of speculation and is not without precedent. He is on record of having suspended the introduction of Mineral Royalty Tax for the mining sector in February 2015, immediately after ascending to the Presidency. It must be noted that this proposed Mineral Royalty Tax was a matter that the late president Sata together with the former Minister of Finance, Alexander Chikwanda, worked so hard to introduce,” stated Tembo.
“It was therefore frustrating that President Lungu’s lack of spine to withstand pressure from mining companies caused him to set aside this well thought out and progressive Mineral Royalty Tax. As citizens of this Republic, we can only hope that President Lungu has over the years subsequently developed the necessary spine to withstand pressure from mining companies and will stand firm to ensure that ZRA collects this US$7,7 billion from FQM, which is due and payable to the citizens of this Republic, through the treasury.”