Zambian deputy
finance minister
Miles Sampa
Lusaka, Zambia — 28 November 2012 – The government of Zambia, Africa’s biggest copper producer, says it is losing as much as US$2 billion annually to tax avoidance, and adds that the country’s mining industry is the biggest culprit.

Bloomberg News reports that only one or two mining operations are actually declaring positive earnings, according to deputy finance minister Miles Sampa.

“The other mines, for one reason or another “’ some genuine, some not “’ are always making losses,” Sampa said. “Most of it is due to transfer pricing or tax avoidance. We’re looking at developing a law that will criminalise false reporting.”

Zambia’s governing Patriotic Front has opted not to impose a windfall levy on miners in favor of optimising tax collection and doing away with fiscal incentives. Barrick Gold Corporation, Vedanta Resources plc, Glencore International plc  and First Quantum Minerals Limited all operate mines in the country.

Businesses commonly avoid paying tax through transfer pricing, which distorts inter-division transactions so that a Zambian subsidiary appears to suffer a loss, Sampa said. In other cases, parent companies have loaned money to local units at interest rates higher than the market, creating losses.

A change in the law is being pursued to close loopholes that cost Zambia at least US$1.5 billion a year, Sampa added. “How many hospitals can that build?” he asked “How many roads can that help us to develop?”

Source: Bloomberg News. For more information, click here.