Mopani Copper Mines in tax evasion scandal

MOPANI Copper Mines (MCM) has been cited for tax evasion by the 2013 Africa Progress Report led by former Secretary General Koffi Annan.
Zambia is said to have lost millions of US dollars in export earnings in the way MCM is reported to have
engaged in tax evasion with its major shareholder, Glencore, of Switzerland.
This was the second time that Glencore had been cited for tax evasion. The UK government had investigated allegations surrounding Zambia’s lost tax revenues from foreign-owned mines, including claims that Glencore avoided paying up to £76 million a year in tax on its Mopani Mine in the country.
The Africa Progress Panel comprises 10 distinguished individuals from both the private and public sector and notable on the panel were Gracia Michel the wife of Nelson Mandela and late Mozambique president Samora Michel and former Nigerian President, Olusegun Obasanjo.
Zit was on record according to the Guardian of the United Kingdom (UK), that  Zambia lost more than KR41 billion (K41 trillion) in the past 10 years through tax evasion, which could be traced mainly to mining multinationals.
The Guardian reported that the huge sums had been illegally siphoned out of the country, with most of it ending up in offshore banks and tax havens, according to a report by financial transparency campaigners.
It was noted that MCM was selling Copper to Glencore, which is registered in the town of Zug, at prices “far” below those on the international markets, a practice the team identified as “plausible
evidence of transfer pricing”.
Glencore is the world’s largest commodity trading company, which holds controlling stake through Carlisa Investments, a company based in the British Virgin Islands owned in turn by Glencore Finance, Bermuda.
The European Investment Bank, which had extended a loan to MCM, expressed serious concerns about Glencore’s governance but its executives “strenuously” denied any wrongdoing.
“Attempting to estimate the overall losses associated with mispricing has been described as an exercise in night vision,” the report said.
It said several governments in the region have been sufficiently concerned about transfer pricing to investigate individual companies.
One of the most detailed analytical studies, carried out by Global Financial Integrity, put the average annual loss to Africa between 2008 and 2010 at US$38 billion.
The report said to place this figure in context, it was slightly higher than the flow of development assistance to the region over the same period.
Put differently, Africa could double aid by eliminating trade mispricing. Another US$25 billion was lost through other illicit outflows.
It said African revenue authorities were facing difficulties in ensuring adherence to tax obligations.
“Tracking value-added through a maze of interconnected companies linked through shell companies, holding companies and other intermediaries registered in centres from the British Virgin Islands
to Switzerland and London is challenging for even the most developed tax bodies, and governments have identified transfer pricing as a threat to their tax base,” the report added.
It said for authorities in Africa, enforcing tax codes was often impossible.
Additionally, Zambia was reported to have collected only US$240 million in tax revenue from the mines out of US$10 billion that the mineral exports generated in 2011.
The figure which exposed the unfair tax regime against resource-rich countries in Africa represented only 2.4 per cent of the total export value of Zambia’s major export earner.
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