Zambia ‘Holds back’ US$500 million value-added tax repayments from mining companies

Zambia, Africa’s leader in production of the red metal has withheld about $500 million in value-added tax repayments from mining companies failing to provide importer documentation, Bloomberg newswire reported.

The web-based publication stated that the Zambia’s Revenue Authority (ZRA)has withheld over US$500 million in repayments after it last year introduced  rules requiring the provision of documents from importers, it said citing sources close to the revenue agency.

The sources estimated the amount at about USS500 million for lack exact figures. Vedanta Resources Plc (VED) and other miners in Africa’s biggest copper producer say they can’t comply with the rules because they sell to commodity traders and don’t know the final destination of their output.

The tax authority also stipulated that export revenue must be paid directly to a Zambian bank, while some mining companies are paid via foreign accounts, Bloomberg News added. Efforts to get a confirmation from ZRA’s spokesperson, Mumbuna Kufekisa failed as he declined to comment.

Bloomberg News, could however, not get independent confirmations from the Chamber of Mines of Zambia, a consortium of foreign mining companies, while John Gladston, a spokesman for First Quantum Minerals Ltd. (FM), and Cephas Sinyangwe, a spokesman for Glencore Xstrata Plc (GLEN)’s Mopani Copper Mines Plc unit also declined to comment.

It is estimated that Zambia loses as much as $2 billion a year to tax avoidance, with the mining industry the biggest culprit, Bloomberg News reported further citing then Deputy Finance Minister Miles Sampa as having stated in November 2012.

Zambia introduced a law in July to better monitor exports and earnings. While copper accounts for about 70 percent of export earnings, revenue from the industry makes up less than 5 percent of the country’s budget.

Vedanta’s Konkola Copper Mines recently dragged the ZRA to court seeking redress over a 3.2 billion kwacha tax bill relating to a retrospective 16 percent VAT charge on exports from January 2011 to March 2013. Joy Sata, a spokeswoman for Konkola, didn’t return calls seeking comment.

Zambia copper output increased 21 percent to 916,000 metric tons in the first 11 months of 2013 from a year earlier, according to the Bank of Zambia. The biggest producers include First Quantum, Mopani, Konkola and Barrick Gold Corp. (ABX), which owns the Lumwana copper mine in the northwest of Zambia.

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